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Exam 12: The Design of the Tax System

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Question 1

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What are the characteristic(s) of an efficient tax system?

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One tax system is more efficient than another if it raises the same amount of revenue at a smaller cost to taxpayers.

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Time spent filling out tax forms, time spent keeping tax records, and government resources spent to enforce tax laws are examples of the __________ of the U.S. income tax system.

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

What has been the relationship over the past century between the U.S. economy's income and the percentage of that income that the government collects in revenues?

A tax system based on the ability-to-pay principle claims that all citizens should

Scenario 12-2 Suppose Regina and Ben receive great satisfaction from their consumption of cheesecake. Regina would be willing to purchase only one slice and would pay up to $13 for it. Ben would be willing to pay $17 for his first slice, $14 for his second slice, and $10 for his third slice. The current market price is $10 per slice. -Refer to Scenario 12-2. Assume that the government places a $4 tax on each slice of cheesecake and that the new equilibrium price is $14. What is Regina's consumer surplus from cheesecake?

Scenario 12-3 A taxpayer faces the following tax rates on her income: ​ 20 percent of the first $\$ 40,000$ of her income; 30 percent of all her income above $\$ 40,000$ . -Refer to Scenario 12-3. At what level of income would the taxpayer's marginal tax rate be 30 percent and her average tax rate be 25 percent?

Table 12-10 -Refer to Table 12-10. Do any of the plans achieve vertical equity?

In 2017, which category represented the largest source of receipts for the U.S. federal government?

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

Table 12-9 $\begin{array} { | l | l | } \hline \text { Income } & \text { Amount of Tax } \\\hline \$ 50,000 & \$ 5,000 \\\hline \$ 60,000 & \$ 5,500 \\\hline \$ 70,000 & \$ 6,000 \\\hline\end{array}$ -Refer to Table 12-9. Does the tax system achieve vertical equity?

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

An efficient tax system is one that imposes small

Which tax system requires all taxpayers to pay the same percentage of their income in taxes?

Scenario 12-2 Suppose Regina and Ben receive great satisfaction from their consumption of cheesecake. Regina would be willing to purchase only one slice and would pay up to $13 for it. Ben would be willing to pay $17 for his first slice, $14 for his second slice, and $10 for his third slice. The current market price is $10 per slice. -Refer to Scenario 12-2. Assume that the government places a $4 tax on each slice of cheesecake and that the new equilibrium price is $14. Which of the following statements is correct?

What are the two main sources of tax revenues for state and local governments?

Economics alone cannot determine the best way to balance the goals of efficiency and equity.

As a person's or family's income rises, the marginal federal income tax rate __________.

By law, all states must have a state income tax.

European countries tend to rely on which type of tax more so than the United States does?