Question 1

Horizontal equity refers to a tax system in which individuals with higher incomes pay more in taxes than individuals with lower incomes.

Accepted Answer

A) True 
 B)False

Question 2

Vertical equity in taxation refers to the idea that people

Accepted Answer

A)   in unequal conditions should be treated differently.
B)   in equal conditions should pay equal taxes.
C)   should pay taxes based on the benefits they receive from the government.
D)   should pay a proportional tax rather than a progressive tax.E) A) and B)
F) A) and C)

Question 3

Table 12-17
The dollar amounts in the last three columns are the taxes owed under the three different tax systems.
 
-Refer to Table 12-17.Which of the three tax systems exhibits vertical equity?

Accepted Answer

A)   Tax System A
B)   Tax System B
C)   Tax System C
D)   All of the systems exhibit vertical equity.E) None of the above
F) A) and B)

Question 4

Some states do not have a state income tax.

Accepted Answer

A) True 
 B)False

Question 5

Vertical equity is not consistent with a regressive tax structure.

Accepted Answer

A) True 
 B)False

Question 6

An income tax in which the average tax rate is the same for all taxpayers would be considered a

Accepted Answer

A)   progressive tax.
B)   regressive tax.
C)   distortion-free tax.
D)   proportional tax.E) A) and D)
F) C) and D)

Question 7

If government spending exceeds government receipts,the government has a

Accepted Answer

A)   budget surplus.Other things the same,the surplus rises if taxes rise.
B)   budget surplus.Other things the same the surplus rises if taxes fall.
C)   budget deficit.Other things the same,the deficit rises if taxes rise.
D)   budget deficit.Other things the same,the deficit rises if taxes fall.E) A) and B)
F) B) and C)

Question 8

The average tax rate measures the

Accepted Answer

A)   fraction of spending paid in taxes.
B)   fraction of income paid in taxes.
C)   incremental rate of tax on income.
D)   average deadweight loss from all taxes.E) A) and B)
F) A) and C)

Question 9

Under a progressive tax system,the marginal tax rate could be equal to the average tax rate only when a taxpayer

Accepted Answer

A)   has a very high income.
B)   has a very low income.
C)   is self-employed.
D)   invests in a retirement plan.E) A) and C)
F) A) and B)

Question 10

According to the benefits principle,it is fair for people to pay taxes based on the benefits they receive from the government.

Accepted Answer

A) True 
 B)False

Question 11

A value-added tax or VAT is a tax on

Accepted Answer

A)   retail purchases only.
B)   wholesale purchases only.
C)   pollution.
D)   all stages of production of a good.E) C) and D)
F) B) and D)

Question 12

In 2009,approximately how much of federal government spending went to Social Security?

Accepted Answer

A)   9%
B)   19%
C)   29%
D)   39%E) A) and B)
F) None of the above

Question 13

Which of the following is a characteristic of a more efficient tax system?

Accepted Answer

A)   The system minimizes deadweight loss.
B)   The system raises the same amount of revenue at a lower cost.
C)   The system minimizes administrative burdens.
D)   All of the above are correct.E) A) and B)
F) All of the above

Question 14

The largest source of income for the federal government is

Accepted Answer

A)   individual income taxes.
B)   corporate taxes.
C)   tariffs.
D)   "sin" taxes on alcohol and cigarettes.E) C) and D)
F) A) and B)

Question 15

Who pays a corporate income tax?

Accepted Answer

A)   owners of the corporation
B)   customers of the corporation
C)   workers of the corporation
D)   All of the above are correct.E) A) and B)
F) B) and C)

Question 16

The marginal tax rate for a lump-sum tax

Accepted Answer

A)   is always positive.
B)   is always negative.
C)   is zero.
D)   can take on any value but must be greater than the average tax rate.E) B) and C)
F) C) and D)

Question 17

In choosing the form of a tax,there is often a tradeoff between

Accepted Answer

A)   allocative and productive efficiency.
B)   profits and revenues.
C)   efficiency and fairness.
D)   fairness and profits.E) A) and B)
F) All of the above

Question 18

If tax revenues from a cigarette tax are used to pay for health care expenses related to lung cancer,the cigarette tax could be justified using the __________.

Accepted Answer

The answer of If tax revenues from a cigarette tax...

Question 19

If your income is $50,000,your income tax liability is $10,000,and you paid $0.25 in taxes on the last dollar you earned,your

Accepted Answer

A)   marginal tax rate is 20 percent.
B)   average tax rate is 5 percent.
C)   marginal tax rate is 25 percent.
D)   average tax rate is 25 percent.E) A) and B)
F) A) and C)

Question 20

Vertical equity refers to a tax system in which individuals with higher incomes pay more in taxes than individuals with lower incomes.

Accepted Answer

A) True 
 B)False

Exam 12: The Design of the Tax System

In 2009,approximately how much of federal government spending went to Social Security?

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Under a progressive tax system,the marginal tax rate could be equal to the average tax rate only when a taxpayer

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Some states do not have a state income tax.

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Which of the following is a characteristic of a more efficient tax system?

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If tax revenues from a cigarette tax are used to pay for health care expenses related to lung cancer,the cigarette tax could be justified using the __________.

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In choosing the form of a tax,there is often a tradeoff between

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Table 12-17 The dollar amounts in the last three columns are the taxes owed under the three different tax systems. -Refer to Table 12-17.Which of the three tax systems exhibits vertical equity?

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According to the benefits principle,it is fair for people to pay taxes based on the benefits they receive from the government.

Correct AnswerverifiedShow Answer

If government spending exceeds government receipts,the government has a

Correct AnswerverifiedShow Answer

Horizontal equity refers to a tax system in which individuals with higher incomes pay more in taxes than individuals with lower incomes.

Correct AnswerverifiedShow Answer

A value-added tax or VAT is a tax on

Correct AnswerverifiedShow Answer

Vertical equity in taxation refers to the idea that people

Correct AnswerverifiedShow Answer

The largest source of income for the federal government is

Correct AnswerverifiedShow Answer

If your income is $50,000,your income tax liability is $10,000,and you paid $0.25 in taxes on the last dollar you earned,your

Correct AnswerverifiedShow Answer

The marginal tax rate for a lump-sum tax

Correct AnswerverifiedShow Answer

Vertical equity refers to a tax system in which individuals with higher incomes pay more in taxes than individuals with lower incomes.

Correct AnswerverifiedShow Answer

An income tax in which the average tax rate is the same for all taxpayers would be considered a

Correct AnswerverifiedShow Answer

The average tax rate measures the

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Vertical equity is not consistent with a regressive tax structure.

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Who pays a corporate income tax?

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