Question 1

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) B) and C)

Question 2

Suppose that in 2020 the average citizen's federal tax bill is $9,372, and total federal spending is $10,824 per person. In 2020, the federal government will have

Accepted Answer

A)  a budget surplus.
B)  a budget deficit.
C)  horizontal equity.
D)  vertical equity.E) A) and B)
F) B) and C)

Question 3

Table 12-4 
-Refer to Table 12-4. What is the marginal tax rate for a person who makes $35,000?

Accepted Answer

A)  25%
B)  30%
C)  40%
D)  60%E) None of the above
F) All of the above

Question 4

Sales taxes generate nearly 50% of the tax revenue for state and local governments.

Accepted Answer

A) True 
 B)False

Question 5

​Which of the following is an example of horizontal equity?

Accepted Answer

A)  ​A wealthy individual should pay more taxes than a lower-income individual​
B)  A wealthy individual should have a greater average tax rate than a middle-income individual​
C)  Two persons with identical incomes should pay the same taxes​
D)  A local government decides to impose taxes based on the benefits principle​E) B) and D)
F) A) and B)

Question 6

When the government taxes labor earnings we can expect people to

Accepted Answer

A)  work more so they can keep the same standard of living.
B)  work less and enjoy more leisure.
C)  quit their present job and find one that pays better.
D)  stop working altogether and go on welfare.E) A) and C)
F) B) and C)

Question 7

Which of the following is not an advantage of a lump-sum tax in comparison to other types of taxes?

Accepted Answer

A)  It would not cause deadweight loss.
B)  It imposes a minimal administrative burden on taxpayers.
C)  It is more equitable.
D)  It is more efficient.E) A) and B)
F) None of the above

Question 8

Table 12-19 
-Refer to Table 12-19. The tax system is

Accepted Answer

A)  progressive.
B)  regressive.
C)  proportional.
D)  lump sum.E) A) and B)
F) A) and D)

Question 9

The idea that people in equal conditions should pay equal taxes is referred to as

Accepted Answer

A)  horizontal equity.
B)  vertical equity.
C)  the ability-to-pay principle.
D)  the marriage tax.E) None of the above
F) B) and D)

Question 10

Table 12-11 
-Refer to Table 12-11. If Peggy has taxable income of $43,000, her marginal tax rate is

Accepted Answer

A)  8%.
B)  16%.
C)  24%.
D)  34%.E) A) and D)
F) All of the above

Question 11

The income tax requires that taxpayers pay 10percent on the first $40,000 of income and 20 percent on all income over $40,000. Karen paid $6,000 in taxes. What were her marginal and average tax rates?

Accepted Answer

A)  20 percent and 12 percent, respectively
B)  20 percent and 15 percent, respectively
C)  10 percent and 12 percent respectively
D)  10 percent and 15 percent respectivelyE) B) and C)
F) None of the above

Question 12

Vertical equity refers to a tax system in which individuals with similar incomes pay similar taxes.

Accepted Answer

A) True 
 B)False

Question 13

What is the marginal tax rate of a lump-sum tax of $5,000?

Accepted Answer

The marginal tax rate would be...

Question 14

Deadweight losses represent the

Accepted Answer

A)  inefficiency that taxes create.
B)  shift in benefit from producers to consumers.
C)  part of consumer and producer surplus that is now revenue to the government.
D)  increase in revenue to the government.E) A) and D)
F) B) and C)

Question 15

Costas faces a progressive federal income tax structure that has the following marginal tax rates: 0 percent on the first $10,000, 10 percent on the next $10,000, 15 percent on the next $10,000, 25 percent on the next $10,000, and 50 percent on all additional income. In addition, he must pay 5 percent of his income in state income tax and 15.3 percent of his labor income in federal payroll taxes. Costas earns $70,000 per year in salary and another $20,000 per year in non-labor income. What is his average tax rate, and what is his marginal tax rate on his salary?

Accepted Answer

A)  His average tax rate is 17.19 percent, and the marginal tax rate on his salary is 55 percent.
B)  His average tax rate is 50.23 percent, and the marginal tax rate on his salary is 70.3 percent.
C)  His average tax rate is 53.63 percent, and the marginal tax rate on his salary is 70.3 percent.
D)  His average tax rate is 55.79 percent, and the marginal tax rate on his salary is 70.3 percent.E) A) and B)
F) B) and C)

Question 16

The state government requires all persons to pay 5% of their incomes in income tax.This is an example of:

Accepted Answer

A)  ​The benefits principle
B)  ​a proportional tax
C)  ​a regressive tax
D)  ​a progressive taxE) B) and C)
F) A) and B)

Question 17

In 2014, the largest source of receipts for state and local governments was individual income taxes.

Accepted Answer

A) True 
 B)False

Question 18

A tax levied on the total amount spent in retail stores is called

Accepted Answer

A)  a sales tax.
B)  an excise tax.
C)  a retail tax.
D)  an income tax.E) B) and C)
F) A) and D)

Question 19

Table 12-10 
-Refer to Table 12-10. If Jace has $33,000 in taxable income, his marginal tax rate is

Accepted Answer

A)  10%.
B)  15%.
C)  25%.
D)  28%.E) All of the above
F) None of the above

Question 20

Corporate profits are

Accepted Answer

A)  included in payroll taxes.
B)  exempt from taxes.
C)  taxed twice, once as profit and once as dividends.
D)  taxed to pay for Medicare.E) C) and D)
F) B) and D)

Exam 12: The Design of the Tax System

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

Correct Answer
verified

Vertical equity refers to a tax system in which individuals with similar incomes pay similar taxes.

Correct Answer
verified

Suppose that in 2020 the average citizen's federal tax bill is $9,372, and total federal spending is $10,824 per person. In 2020, the federal government will have

Correct Answer
verified

Which of the following is not an advantage of a lump-sum tax in comparison to other types of taxes?

Correct Answer
verified

When the government taxes labor earnings we can expect people to

Correct Answer
verified

Correct Answer
verified

Table 12-11 -Refer to Table 12-11. If Peggy has taxable income of $43,000, her marginal tax rate is

Correct Answer
verified

In 2014, the largest source of receipts for state and local governments was individual income taxes.

Correct Answer
verified

The idea that people in equal conditions should pay equal taxes is referred to as

Correct Answer
verified

The state government requires all persons to pay 5% of their incomes in income tax.This is an example of:

Correct Answer
verified

Sales taxes generate nearly 50% of the tax revenue for state and local governments.

Correct Answer
verified

Table 12-10 -Refer to Table 12-10. If Jace has $33,000 in taxable income, his marginal tax rate is

Correct Answer
verified

Table 12-19 -Refer to Table 12-19. The tax system is

Correct Answer
verified

What is the marginal tax rate of a lump-sum tax of $5,000?

Correct Answer
verified
The marginal tax rate would be...
View Answer

Deadweight losses represent the

Correct Answer
verified

Corporate profits are

Correct Answer
verified

Which of the following is an example of horizontal equity?

Correct Answer
verified

Table 12-4 -Refer to Table 12-4. What is the marginal tax rate for a person who makes $35,000?

Correct Answer
verified

A tax levied on the total amount spent in retail stores is called

Correct Answer
verified

The income tax requires that taxpayers pay 10percent on the first $40,000 of income and 20 percent on all income over $40,000. Karen paid $6,000 in taxes. What were her marginal and average tax rates?

Correct Answer
verified

Exam 12: The Design of the Tax System

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

Correct AnswerverifiedShow Answer

Vertical equity refers to a tax system in which individuals with similar incomes pay similar taxes.

Correct AnswerverifiedShow Answer

Suppose that in 2020 the average citizen's federal tax bill is $9,372, and total federal spending is $10,824 per person. In 2020, the federal government will have

Correct AnswerverifiedShow Answer

Which of the following is not an advantage of a lump-sum tax in comparison to other types of taxes?

Correct AnswerverifiedShow Answer

When the government taxes labor earnings we can expect people to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Table 12-11 -Refer to Table 12-11. If Peggy has taxable income of $43,000, her marginal tax rate is

Correct AnswerverifiedShow Answer

In 2014, the largest source of receipts for state and local governments was individual income taxes.

Correct AnswerverifiedShow Answer

The idea that people in equal conditions should pay equal taxes is referred to as

Correct AnswerverifiedShow Answer

The state government requires all persons to pay 5% of their incomes in income tax.This is an example of:

Correct AnswerverifiedShow Answer

Sales taxes generate nearly 50% of the tax revenue for state and local governments.

Correct AnswerverifiedShow Answer

Table 12-10 -Refer to Table 12-10. If Jace has $33,000 in taxable income, his marginal tax rate is

Correct AnswerverifiedShow Answer

Table 12-19 -Refer to Table 12-19. The tax system is

Correct AnswerverifiedShow Answer

What is the marginal tax rate of a lump-sum tax of $5,000?

Correct AnswerverifiedThe marginal tax rate would be...View AnswerShow Answer

Deadweight losses represent the

Correct AnswerverifiedShow Answer

Corporate profits are

Correct AnswerverifiedShow Answer

​Which of the following is an example of horizontal equity?

Correct AnswerverifiedShow Answer

Table 12-4 -Refer to Table 12-4. What is the marginal tax rate for a person who makes $35,000?

Correct AnswerverifiedShow Answer

A tax levied on the total amount spent in retail stores is called

Correct AnswerverifiedShow Answer

The income tax requires that taxpayers pay 10percent on the first $40,000 of income and 20 percent on all income over $40,000. Karen paid $6,000 in taxes. What were her marginal and average tax rates?

Correct AnswerverifiedShow Answer

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The marginal tax rate would be...
View Answer

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Which of the following is an example of horizontal equity?

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