Question 1

From the time of Benjamin Franklin to the present, the percentage of the average American's income that goes to pay taxes has

Accepted Answer

A)   decreased from about 20 percent to about 10 percent.
B)   remained constant at about 10 percent.
C)   has risen from less than 2 percent to about 33.3 percent.
D)   has risen from less than 5 percent to about 25 percent.E) A) and B)
F) A) and C)

Question 2

Suppose the government taxes 10 percent of the first $40,000 of income and 20 percent of all income over $40,000. Shahina paid $10,000 in taxes. What were her marginal and average tax rates?

Accepted Answer

A)   20 percent and 15 percent, respectively
B)   20 percent and 14 percent, respectively
C)   10 percent and 15 percent respectively
D)   10 percent and 14 percent respectivelyE) All of the above
F) None of the above

Question 3

Table 12-6
The table below shows the marginal tax rates for an unmarried taxpayer for various levels of taxable income. 
-Refer to Table 12-6. For this tax schedule, what is the average tax rate for an individual with $49,000 in taxable income?

Accepted Answer

A)   25.8%
B)   27.5%.
C)   40.0%
D)   43.7%E) None of the above
F) A) and B)

Question 4

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

Accepted Answer

A)   progressive.
B)   regressive.
C)   proportional.
D)   lump sum.E) None of the above
F) B) and C)

Question 5

Table 12-23
The dollar amounts in the last three columns are the taxes owed under the three different tax systems. 
-Refer to Table 12-23. 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) C) and D)
F) None of the above

Question 6

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

Accepted Answer

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

Question 7

Country A's tax system is more efficient than Country B's tax system if

Accepted Answer

A)   Country A collects less tax revenue than Country B, and the cost to taxpayers is the same in both countries.
B)   Country A collects more tax revenue than Country B, even though the cost to taxpayers is greater in Country A than in Country B.
C)   the same amount of revenue is raised in both countries, but the cost to taxpayers is smaller in Country A than in Country B.
D)   the same amount of revenue is raised in both countries, but the taxes are collected in a shorter amount of time in Country A than in Country B.E) A) and B)
F) All of the above

Question 8

Suppose the government taxes 30 percent of the first $70,000 and 50 percent of all income above $70,000. For a person earning $100,000, the marginal tax rate is

Accepted Answer

A)   30 percent, and the average tax rate is 50 percent.
B)   30 percent, and the average tax rate is 36 percent.
C)   50 percent, and the average tax rate is 40 percent.
D)   50 percent, and the average tax rate is 36 percent.E) B) and D)
F) None of the above

Question 9

An excise tax is a tax on a specific good, like gasoline.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following contributes to the projected rise in government spending on Social Security and Medicare as a percentage of GDP?

Accepted Answer

A)   increasing life expectancies
B)   increasing healthcare costs
C)   increasing fertility rates
D)   Both a and b are correct.E) A) and B)
F) A) and D)

Question 11

The most efficient tax possible is a

Accepted Answer

A)   marginal income tax.
B)   lump-sum tax.
C)   consumption tax.
D)   corporate profit tax.E) None of the above
F) All of the above

Question 12

Table 12-5 
-Refer to Table 12-5. What is the marginal tax rate for a person who makes $120,000?

Accepted Answer

A)   25%
B)   35%
C)   45%
D)   60%E) C) and D)
F) None of the above

Question 13

Goals of efficiency and equity in tax policy are

Accepted Answer

A)   complementary in most countries.
B)   necessary for application of the ability-to-pay principle.
C)   often in conflict with each other.
D)   easier to achieve when tax codes are complex.E) A) and B)
F) None of the above

Question 14

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

Accepted Answer

The answer of As a person's or family's income rises,...

Question 15

Most people agree that taxes should impose as small a cost on society as possible and that the burden of taxes should be distributed fairly.

Accepted Answer

A) True 
 B)False

Question 16

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) B) and C)
F) All of the above

Question 17

Define the marginal tax rate.

Accepted Answer

The marginal tax rat...

Question 18

Which of the following is not true about government spending on national defense?

Accepted Answer

A)   It is the third-largest spending category for the U.S. federal government.
B)   It includes salaries of military personnel.
C)   It fluctuates over time as the political climate changes.
D)   It is not financed with tax revenue.E) B) and C)
F) A) and D)

Question 19

The principle that people should pay taxes based on the benefits they receive from government services is called the

Accepted Answer

A)   pay principle.
B)   tax-benefit principle.
C)   government services principle.
D)   benefits principle.E) B) and C)
F) C) and D)

Question 20

The U.S. federal government collects taxes in a number of ways. Rank the following sources of revenue from the largest to the smallest.

Accepted Answer

A)   corporate income taxes, individual income taxes, social insurance taxes
B)   social insurance taxes, individual income taxes, corporate income taxes
C)   individual income taxes, social insurance taxes, corporate income taxes
D)   individual income taxes, corporate income taxes, social insurance taxesE) None of the above
F) B) and C)

Exam 12: The Design of the Tax System

Which of the following contributes to the projected rise in government spending on Social Security and Medicare as a percentage of GDP?

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Goals of efficiency and equity in tax policy are

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Suppose the government taxes 10 percent of the first $40,000 of income and 20 percent of all income over $40,000. Shahina paid $10,000 in taxes. What were her marginal and average tax rates?

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Most people agree that taxes should impose as small a cost on society as possible and that the burden of taxes should be distributed fairly.

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The principle that people should pay taxes based on the benefits they receive from government services is called the

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Which of the following is not true about government spending on national defense?

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

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The U.S. federal government collects taxes in a number of ways. Rank the following sources of revenue from the largest to the smallest.

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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?

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Table 12-5 -Refer to Table 12-5. What is the marginal tax rate for a person who makes $120,000?

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Define the marginal tax rate.

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

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Table 12-6 The table below shows the marginal tax rates for an unmarried taxpayer for various levels of taxable income. -Refer to Table 12-6. For this tax schedule, what is the average tax rate for an individual with $49,000 in taxable income?

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Suppose the government taxes 30 percent of the first $70,000 and 50 percent of all income above $70,000. For a person earning $100,000, the marginal tax rate is

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An excise tax is a tax on a specific good, like gasoline.

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The most efficient tax possible is a

Correct AnswerverifiedShow Answer

Country A's tax system is more efficient than Country B's tax system if

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

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From the time of Benjamin Franklin to the present, the percentage of the average American's income that goes to pay taxes has

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Table 12-23 The dollar amounts in the last three columns are the taxes owed under the three different tax systems. -Refer to Table 12-23. Which of the three tax systems exhibits vertical equity?

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The marginal tax rat...
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