Deck 7: Financing Government: What Is a Fair System of Taxation

Question 1

Conservatives are against a progressive income tax system because it

A) redistributes income away from productive individuals and businesses.
B) encourages people to work "off the books" and avoid paying taxes.
C) is unnecessarily bureaucratic and intrusive.
D) All of the above.

Answer 1

D

Question 2

Conservatives assert that a lower savings rate has resulted in all of the following except

A) lower investment.
B) higher labor productivity.
C) lower per capita income.
D) higher unemployment rate.

Answer 2

B

Question 3

Under a proportional tax system, the higher the income

A) the same tax rate applies to the last dollar of income.
B) a higher tax rate applies to the last dollar of income.
C) a lower tax rate applies to the last dollar of income.
D) None of the above.

Answer 3

A

Question 4

Under a progressive consumption tax system, tax rates would increase with

A) income.
B) savings.
C) investments.
D) consumption.

Question 5

The Social Security tax rate is

A) proportional and then regressive.
B) progressive and then proportional.
C) progressive and then regressive.
D) None of the above.

Question 6

Radicals argue that the declining share of federal income taxes from corporations reflects their

A) higher productivity.
B) slower profit growth.
C) increased compliance costs.
D) political influence over government.

Question 7

Adam Smith and Karl Marx would agree that taxes should be used to support the following activities except

A) public schools.
B) public transportation.
C) roads.
D) All of the above.
E) None of the above.

Question 8

During a recession, the progressive income tax causes government revenues to

A) rise proportionately more than the increase in GDP.
B) fall proportionately more than the increase in GDP.
C) rise proportionately more than the decline in GDP.
D) fall proportionately more than the decline in GDP.
E) None of the above.

Question 9

Under President Bush's tax plan, tax rates will

A) rise most sharply for high-income taxpayers.
B) decline for those earning below $75,000.
C) remain about the same.
D) decline for all income taxpayers.
E) None of the above.

Question 10

Since 1913

A) corporations have been the primary source of federal taxes.
B) federal tax law has been simplified and compliance made easier.
C) states account for most income tax revenues.
D) personal exemptions for most taxpayers have been significantly reduced.

Question 11

Radicals argue that the progressive consumption tax

A) is too cumbersome to administer.
B) requires an inordinate increase in consumption by wealthy taxpayers.
C) will be ineffective because the government cannot track individual consumption expenditures.
D) None of the above.

Question 12

Which tax policy would radicals not favor?

A) Lowering the capital gains tax.
B) Exemption from taxes for those earning less than $25,000 per year.
C) Punitive inheritance taxes.
D) Flat tax on all stock market transactions.

Question 13

Conservatives believe that a progressive tax system is based on the faulty idea of diminishing satisfaction from an additional dollar of earnings.

Question 14

Liberals believe that an individual's income is the best indicator of his or her ability to pay taxes.

Question 15

Radicals assert that a consumption tax is less burdensome for rich taxpayers compared to poor taxpayers.

Question 16

Since 1950, the Federal government has obtained most of its revenues from corporate income taxes.

Question 17

The Conservative objective of eliminating taxes on savings is to encourage investment.

Question 18

The United States has the top marginal income tax rate among industrialized countries.

Question 19

Liberals claim that the current federal budget surplus is partially due to the increase in the marginal income tax rate for high-income taxpayers.

Question 20

Radicals would tax stock market transactions and eliminate inheritance taxes.

Question 21

Liberals claim that the progressive income acts as an "automatic stabilizer" on the business cycle.

Question 22

Liberals would like to increase tax collections rather than increase tax rates to obtain more revenue.

Question 23

Conservatives argue that a progressive tax rate structure encourages individuals to work harder.

Question 24

Under President Bush's tax legislation, the income tax rate on capital gains and dividends has increased.

Question 25

Liberals would favor a decline in the funding of the Internal Revenue Service.

Question 26

Radicals would support a flat tax rate on all income.