Question 1

Special interests influence tax policy at all levels of government,but ______.

Accepted Answer

A)  they are most effective at the local level
B)  they are most effective at the state level
C)  they are most effective at the federal level
D)  they are equally effective at all levels of governmentE) B) and C)
F) All of the above C

Question 2

What is the ability-to-pay principle of taxation? List one strength and one weakness of the ability-to-pay principle as a guide to tax policy.

Accepted Answer

The ability to pay principle states that...

Question 3

Is beer taxation a regressive,proportional,or progressive tax if viewed as a point in time? Please explain your answer.What about if viewed over a person's lifetime? If your answer changes,please explain why.

Accepted Answer

Viewed at a point in time,beer taxation ...

Question 4

Define the benefit principle.List two real world taxes that have the features of a tax based on the benefit principle.Why can't the benefit principle be the sole principle of taxation?

Accepted Answer

The benefit principle states that the pe...

Question 5

There are no indisputable principles of tax equity.

Accepted Answer

A) True 
 B)False  True

Question 6

Since there are many special interests lobbying in favor of different tax changes but no special interests lobbying in favor of the public interest,this suggests that tax code changes will _____.

Accepted Answer

A)  lead towards more regressive taxation
B)  will favor special interests
C)  not be in the direction of efficiency
D)  b and cE) B) and C)
F) A) and B)

Question 7

The principle of horizontal equity is satisfied when _____.

Accepted Answer

A)  individuals receiving the same benefits end up paying the same in taxes
B)  the public interest is being met
C)  all individuals pay the same tax
D)  individuals with an equal ability to pay end up paying the same in taxesE) None of the above
F) A) and D)

Question 8

As conflicts between principles of taxation are normative in nature,_____.

Accepted Answer

A)  agreement is easily reached
B)  disagreement cannot easily be resolved
C)  the benefit principle should be the proper default
D)  the Pareto criteria should be used insteadE) A) and D)
F) All of the above

Question 9

The benefit principle views _____.

Accepted Answer

A)  a tax as the price that is paid for a government-supplied activity
B)  all government activity as beneficial
C)  all taxes as being beneficial if they are spent in the public interest
D)  all Pareto-efficient moves as beneficialE) B) and D)
F) A) and D)

Question 10

A tax that that takes the same percentage of a taxpayer's income regardless no matter what their total income is called a _____.

Accepted Answer

A)  proportional tax
B)  progressive tax
C)  head tax
D)  regressive taxE) A) and C)
F) A) and B)

Question 11

Tolls for government turnpikes have features of a tax based on _____.

Accepted Answer

A)  the benefit principle
B)  the ability-to-pay principle
C)  the Ramsey rule
D)  redistributionE) A) and B)
F) A) and C)

Question 12

Welfare programs satisfy the criteria of the benefit principle.

Accepted Answer

A) True 
 B)False

Question 13

Define progressive,proportional,and regressive taxes.In a graph with percentage of income paid in taxes and income on the axis,draw three lines representing each of the three types of taxes.

Accepted Answer

Progressive taxes are taxes that take a ...

Question 14

A tax that takes a smaller percentage of an individual's income as their income rises is called a _____.

Accepted Answer

A)  proportional tax
B)  progressive tax
C)  sumptuary tax
D)  regressive taxE) A) and D)
F) A) and C)

Question 15

Consider a world with two income earners and an income tax.Individual A earns $25,000 and pays $1,000 in taxes.Individual B earns $100,000 and pays $4,000 in taxes.Which of the following best classifies the income tax system in this world?

Accepted Answer

A)  proportional
B)  progressive
C)  regressive
D)  sumptuaryE) All of the above
F) B) and C)

Question 16

Adam Smith noted that when public expenditures are undertake for the general benefit of everyone in a society then _____.

Accepted Answer

A)  there is considerable conflict between the benefit principle and the ability-to-pay principle
B)  there is no conflict between the benefit principle and the ability-to-pay principle
C)  the benefit principle provides little guide to tax policy
D)  the ability-to-pay principle provides little guide to tax policyE) None of the above
F) B) and D)

Question 17

Suppose Seth and Nathan are college students with the same annual income,yet Seth pays half of the annual income tax that Nathan does.Which statement best summarizes a possible issue with this outcome from a principle of tax policy perspective?

Accepted Answer

A)  It violates the principle of vertical equity.
B)  It violates the principle of diagonal equity.
C)  It violates the principle of horizontal equity.
D)  It violates the benefit principle.E) None of the above
F) All of the above

Question 18

A major tax overhaul is more likely to be in the public interest that a small tax reform.

Accepted Answer

A) True 
 B)False

Question 19

Define horizontal and vertical equity and discuss the concepts with respect to legitimacy and usefulness.

Accepted Answer

The principle of horizontal equity state...

Question 20

The use of a property tax to fund public schools is an example of _____.

Accepted Answer

A)  the benefit principle at work
B)  the ability-to-pay principle at work
C)  a compromise between the benefit and ability-to-pay principles
D)  the Ramsey rule at workE) C) and D)
F) All of the above C

Exam 11: Principles of Tax Policy

Special interests influence tax policy at all levels of government,but ______.

Correct AnswerverifiedC

What is the ability-to-pay principle of taxation? List one strength and one weakness of the ability-to-pay principle as a guide to tax policy.

Correct AnswerverifiedThe ability to pay principle states that...View AnswerShow Answer

Is beer taxation a regressive,proportional,or progressive tax if viewed as a point in time? Please explain your answer.What about if viewed over a person's lifetime? If your answer changes,please explain why.

Correct AnswerverifiedViewed at a point in time,beer taxation ...View AnswerShow Answer

Define the benefit principle.List two real world taxes that have the features of a tax based on the benefit principle.Why can't the benefit principle be the sole principle of taxation?

Correct AnswerverifiedThe benefit principle states that the pe...View AnswerShow Answer

There are no indisputable principles of tax equity.

Correct AnswerverifiedTrue

Since there are many special interests lobbying in favor of different tax changes but no special interests lobbying in favor of the public interest,this suggests that tax code changes will _____.

Correct AnswerverifiedShow Answer

The principle of horizontal equity is satisfied when _____.

Correct AnswerverifiedShow Answer

As conflicts between principles of taxation are normative in nature,_____.

Correct AnswerverifiedShow Answer

The benefit principle views _____.

Correct AnswerverifiedShow Answer

A tax that that takes the same percentage of a taxpayer's income regardless no matter what their total income is called a _____.

Correct AnswerverifiedShow Answer

Tolls for government turnpikes have features of a tax based on _____.

Correct AnswerverifiedShow Answer

Welfare programs satisfy the criteria of the benefit principle.

Correct AnswerverifiedShow Answer

Define progressive,proportional,and regressive taxes.In a graph with percentage of income paid in taxes and income on the axis,draw three lines representing each of the three types of taxes.

Correct AnswerverifiedProgressive taxes are taxes that take a ...View AnswerShow Answer

A tax that takes a smaller percentage of an individual's income as their income rises is called a _____.

Correct AnswerverifiedShow Answer

Consider a world with two income earners and an income tax.Individual A earns $25,000 and pays $1,000 in taxes.Individual B earns $100,000 and pays $4,000 in taxes.Which of the following best classifies the income tax system in this world?

Correct AnswerverifiedShow Answer

Adam Smith noted that when public expenditures are undertake for the general benefit of everyone in a society then _____.

Correct AnswerverifiedShow Answer

Suppose Seth and Nathan are college students with the same annual income,yet Seth pays half of the annual income tax that Nathan does.Which statement best summarizes a possible issue with this outcome from a principle of tax policy perspective?

Correct AnswerverifiedShow Answer

A major tax overhaul is more likely to be in the public interest that a small tax reform.

Correct AnswerverifiedShow Answer

Define horizontal and vertical equity and discuss the concepts with respect to legitimacy and usefulness.

Correct AnswerverifiedThe principle of horizontal equity state...View AnswerShow Answer

The use of a property tax to fund public schools is an example of _____.

Correct AnswerverifiedC

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The ability to pay principle states that...
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The benefit principle states that the pe...
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Progressive taxes are taxes that take a ...
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The principle of horizontal equity state...
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