Question 1

In 1789 the percentage of the average American's income that went to pay taxes was about

Accepted Answer

A)   5%. Today it is about 50%.
B)   5%. Today it is about 25%.
C)   50%. Today it is about 33%.
D)   25%. Today it is about 33%.E) A) and B)
F) A) and C)

Question 2

Which of the following tax systems could not be structured to satisfy conditions of vertical equity?

Accepted Answer

A)   a proportional tax
B)   a regressive tax
C)   a progressive tax
D)   a lump-sum taxE) A) and D)
F) A) and B)

Question 3

Which of the following statements is correct?

Accepted Answer

A)   Both tax avoidance and tax evasion are legal.
B)   Both tax avoidance and tax evasion are illegal.
C)   Tax avoidance is legal, whereas tax evasion is illegal.
D)   Tax avoidance is illegal, whereas tax evasion is legal.E) None of the above
F) B) and C)

Question 4

The three largest categories of spending by the Federal government in order from first to third would be

Accepted Answer

A)   income security, net interest, and national defense
B)   national defense, net interest, and income security
C)   income security, health, and national defense
D)   health, income security, and national defenseE) B) and C)
F) None of the above

Question 5

A budget surplus occurs when government receipts fall short of government spending.

Accepted Answer

A) True 
 B)False

Question 6

Revenues from social insurance taxes are earmarked to pay for Social Security and Medicare.

Accepted Answer

A) True 
 B)False

Question 7

According to the benefits principle, it is fair for people to pay taxes based on their ability to shoulder the tax burden.

Accepted Answer

A) True 
 B)False

Question 8

Two families who live in Plains, GA have identical incomes. The Smiths deduct $5,000 from their taxable income for mortgage interest paid during the year. The Jones family lives in an apartment and is not eligible for a mortgage- interest deduction. This situation exemplifies

Accepted Answer

A)   an application of the benefits principle of taxation.
B)   a violation of horizontal equity.
C)   a violation of vertical equity.
D)   an application of egalitarian tax rules.E) None of the above
F) A) and C)

Question 9

Over the past 100 years, as the U.S. economy's income has grown,

Accepted Answer

A)   tax rates have decreased, while tax revenues have increased.
B)   tax rates have increased, while tax revenues have decreased.
C)   both tax rates and tax revenues have increased.
D)   both tax rates and tax revenues have decreased.E) B) and D)
F) All of the above

Question 10

If a tax takes a constant fraction of income as income rises, it is

Accepted Answer

A)   regressive.
B)   proportional.
C)   progressive.
D)   based on the ability-to-pay principle.E) A) and B)
F) B) and D)

Question 11

Which of the following is an important reason for the projected increase in government spending as a percentage of GDP over the next several decades?

Accepted Answer

A)   the increase in life expectancy resulting from advances in healthcare
B)   an increase in the average number of children per family.
C)   the increase in the number of jobs lost each year to foreign countries as a result of outsourcing
D)   the reduction in the number of high-cost medical proceduresE) A) and D)
F) C) and D)

Exam 12: The Design of the Tax System

Two families who live in Plains, GA have identical incomes. The Smiths deduct $5,000 from their taxable income for mortgage interest paid during the year. The Jones family lives in an apartment and is not eligible for a mortgage- interest deduction. This situation exemplifies

Correct Answer
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Which of the following statements is correct?

Correct Answer
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According to the benefits principle, it is fair for people to pay taxes based on their ability to shoulder the tax burden.

Correct Answer
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Over the past 100 years, as the U.S. economy's income has grown,

Correct Answer
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Revenues from social insurance taxes are earmarked to pay for Social Security and Medicare.

Correct Answer
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Which of the following tax systems could not be structured to satisfy conditions of vertical equity?

Correct Answer
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Which of the following is an important reason for the projected increase in government spending as a percentage of GDP over the next several decades?

Correct Answer
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The three largest categories of spending by the Federal government in order from first to third would be

Correct Answer
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If a tax takes a constant fraction of income as income rises, it is

Correct Answer
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In 1789 the percentage of the average American's income that went to pay taxes was about

Correct Answer
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A budget surplus occurs when government receipts fall short of government spending.

Correct Answer
verified

Exam 12: The Design of the Tax System

Two families who live in Plains, GA have identical incomes. The Smiths deduct $5,000 from their taxable income for mortgage interest paid during the year. The Jones family lives in an apartment and is not eligible for a mortgage- interest deduction. This situation exemplifies

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

According to the benefits principle, it is fair for people to pay taxes based on their ability to shoulder the tax burden.

Correct AnswerverifiedShow Answer

Over the past 100 years, as the U.S. economy's income has grown,

Correct AnswerverifiedShow Answer

Revenues from social insurance taxes are earmarked to pay for Social Security and Medicare.

Correct AnswerverifiedShow Answer

Which of the following tax systems could not be structured to satisfy conditions of vertical equity?

Correct AnswerverifiedShow Answer

Which of the following is an important reason for the projected increase in government spending as a percentage of GDP over the next several decades?

Correct AnswerverifiedShow Answer

The three largest categories of spending by the Federal government in order from first to third would be

Correct AnswerverifiedShow Answer

If a tax takes a constant fraction of income as income rises, it is

Correct AnswerverifiedShow Answer

In 1789 the percentage of the average American's income that went to pay taxes was about

Correct AnswerverifiedShow Answer

A budget surplus occurs when government receipts fall short of government spending.

Correct AnswerverifiedShow Answer

Correct Answer
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