Question 1

Suppose Bob earns $20,000 per year and pays $2,000 in taxes, while Cindy earns $40,000 per year and pays $4,000 in taxes. In this scenario, Bob's tax rate is _______ and Cindy's tax rate is _______.

Accepted Answer

Bob's tax rate is calculated as $2,000 / $20,000 = 0.10 or 10%, and Cindy's tax rate is $4,000 / $40,000 = 0.10 or 10%, making both of their tax rates 10%.

Question 2

Inherent in designing a tax system is the trade-off between:

Accepted Answer

Efficiency in a tax system means minimizing the costs associated with tax collection and economic distortions, while equity involves ensuring that the tax burden is distributed fairly among taxpayers. Balancing these two objectives is a fundamental challenge in tax system design.

Question 3

A proportional tax:

Accepted Answer

A proportional tax takes the same percentage from all taxpayers, regardless of income. This means that whether a person earns $20,000 or $200,000, they will pay the same percentage of their income in taxes.

Question 4

In general, the _______ complicated and _______ efficient the design of a tax system is, the more equitable its incidence.

Accepted Answer

The answer of In general, the _______ complicated and _______...

Question 5

Suppose Javier earns $50,000 per year and pays $500 in taxes, while Camilla earns $100,000 per year and pays $20,000 in taxes. In this scenario, Javier's effective tax rate is _______ and Camilla's effective tax rate is _______.

Accepted Answer

Javier's effective tax rate is calculated as $500 / $50,000 = 0.01 or 1%, and Camilla's effective tax rate is $20,000 / $100,000 = 0.20 or 20%. However, there seems to be a discrepancy in the calculation for Javier's rate in the options provided. Given the options, the closest match to the calculated rates would be 2 percent for Javier (though it should be 1% based on the calculation) and 20 percent for Camilla, indicating a possible error in the question or options.

Question 6

A regressive tax:

Accepted Answer

A regressive tax is characterized by taking a larger percentage of income from low-income earners than from high-income earners, making option C the correct description.

Question 7

A proportional tax:

Accepted Answer

A proportional tax is characterized by taking the same percentage of income from all taxpayers, regardless of their income level. This means that while the amount of tax paid increases with income, the rate or percentage of income paid as tax remains constant across all income levels.

Question 8

Suppose Bob earns $20,000 per year and pays $2,000 in taxes, while Cindy earns $40,000 per year and pays $4,000 in taxes. This is an example of a _______ tax.

Accepted Answer

Both Bob and Cindy are paying 10% of their income in taxes, which is characteristic of a proportional tax system where the tax rate is the same regardless of income level.

Question 9

A progressive tax:

Accepted Answer

A progressive tax system is designed to tax individuals based on their income levels, where those with higher incomes pay a larger percentage of their income in taxes compared to those with lower incomes. This is meant to distribute the tax burden more equitably across different income groups.

Question 10

Suppose Jayden earns $80,000 per year and pays $16,000 in taxes, while Giada earns $100,000 per year and pays $16,000 in taxes. This tax system must be:

Accepted Answer

A lump-sum tax is a fixed amount that does not change with the level of income, which is the case here as both Jayden and Giada pay the same amount of $16,000 regardless of their different income levels.

Question 11

A tax that requires those with low incomes to pay a smaller percentage of their income than high-income earners is a:

Accepted Answer

A progressive tax is designed so that the tax rate increases as the taxable amount increases, meaning high-income earners pay a larger percentage of their income compared to low-income earners. This is in contrast to proportional (or flat) taxes, where everyone pays the same rate regardless of income, and regressive taxes, where lower-income individuals pay a higher percentage of their income than higher-income individuals.

Question 12

A tax that is levied in such a way that low-income taxpayers pay a greater proportion of their income than high-income taxpayers is called a:

Accepted Answer

A regressive tax is characterized by taking a larger percentage of income from low-income earners than from high-income earners, making it more burdensome for those at the lower end of the income scale.

Question 13

A tax that takes the same percentage from all taxpayers is called a:

Accepted Answer

A proportional tax is one that takes the same percentage of income from all taxpayers, regardless of their income level.

Question 14

A lump-sum tax:

Accepted Answer

A lump-sum tax is a fixed amount of tax that everyone has to pay, regardless of their income level, making option D the correct answer.

Question 15

Suppose Bob earns $20,000 per year and Sue earns $100,000 a year. If a flat tax of 10 percent is imposed, Bob will pay _______ in taxes and Sue will pay_______ in taxes. This is an example of a _______ tax.

Accepted Answer

A flat tax of 10 percent means both Bob and Sue pay 10 percent of their income in taxes, which is $2,000 for Bob ($20,000 * 0.10) and $10,000 for Sue ($100,000 * 0.10). This is an example of a proportional tax, where the tax rate is the same regardless of income.

Question 16

Which of the following is not one of the general classifications of taxes?

Accepted Answer

Gradual is not a general classification of taxes. Taxes are typically classified as regressive, progressive, or proportional based on how the tax rate changes in relation to income.

Question 17

Suppose Javier earns $50,000 per year and pays $500 in taxes, while Camilla earns $100,000 per year and pays $20,000 in taxes. This tax system must be:

Accepted Answer

This tax system is progressive because the higher income earner, Camilla, pays a higher percentage of her income in taxes compared to Javier, the lower income earner. This indicates that the tax rate increases as the taxable amount increases.

Question 18

In general, the most efficient taxes:

Accepted Answer

Efficient taxes, which minimize the economic distortion they cause, often do not distribute the tax burden in a way that is considered equitable or fair. Equity in taxation refers to the fairness of the tax distribution among different groups, which may require sacrificing some efficiency to achieve a more equitable outcome.

Question 19

Taxes are generally classified into three categories:

Accepted Answer

Taxes are classified into three main categories: progressive, regressive, and proportional. Progressive taxes increase as the taxpayer's income increases, regressive taxes take a larger percentage from low-income earners than high-income earners, and proportional taxes (also known as flat taxes) take the same percentage from all taxpayers, regardless of income.

Question 20

The majority of total tax revenues come from:

Accepted Answer

The majority of total tax revenues in many countries, especially in the United States, come from personal income taxes and payroll taxes. Personal income taxes are levied on individuals' earnings, while payroll taxes are taken from both employees' wages and employers to fund social insurance programs like Social Security and Medicare. These two sources combined typically constitute the largest portion of tax revenue for the federal government.

Quiz 20: Taxation and the Public Budget

Suppose Bob earns $20,000 per year and pays $2,000 in taxes, while Cindy earns $40,000 per year and pays $4,000 in taxes. In this scenario, Bob's tax rate is _ and Cindy's tax rate is _.

Inherent in designing a tax system is the trade-off between:

A proportional tax:

In general, the _ complicated and _ efficient the design of a tax system is, the more equitable its incidence.

Suppose Javier earns $50,000 per year and pays $500 in taxes, while Camilla earns $100,000 per year and pays $20,000 in taxes. In this scenario, Javier's effective tax rate is _ and Camilla's effective tax rate is _.

A regressive tax:

A proportional tax:

Suppose Bob earns $20,000 per year and pays $2,000 in taxes, while Cindy earns $40,000 per year and pays $4,000 in taxes. This is an example of a _______ tax.

A progressive tax:

Suppose Jayden earns $80,000 per year and pays $16,000 in taxes, while Giada earns $100,000 per year and pays $16,000 in taxes. This tax system must be:

A tax that requires those with low incomes to pay a smaller percentage of their income than high-income earners is a:

A tax that is levied in such a way that low-income taxpayers pay a greater proportion of their income than high-income taxpayers is called a:

A tax that takes the same percentage from all taxpayers is called a:

A lump-sum tax:

Suppose Bob earns $20,000 per year and Sue earns $100,000 a year. If a flat tax of 10 percent is imposed, Bob will pay ___ in taxes and Sue will pay_ in taxes. This is an example of a _____ tax.

Which of the following is not one of the general classifications of taxes?

Suppose Javier earns $50,000 per year and pays $500 in taxes, while Camilla earns $100,000 per year and pays $20,000 in taxes. This tax system must be:

In general, the most efficient taxes:

Taxes are generally classified into three categories:

The majority of total tax revenues come from: