Question 1

Which of the following distinctions separates government user charges from taxes?&#10;A) Taxes are spent for general government costs and are not earmarked; user charges are earmarkeD)&#10;B) The federal government collects taxes but not user charges.&#10;C) Taxes are collected by coercion; user charges are proceeds from voluntary exchange.&#10;D) None of the above.

Accepted Answer

Taxes are mandatory payments without direct return to the payer, while user charges are payments for specific services or goods provided by the government, implying a voluntary exchange for a direct benefit.

Question 2

Where was the first state-operated lottery of the twentieth century?&#10;A) Indiana&#10;B) Florida&#10;C) New Hampshire&#10;D) Louisiana

Accepted Answer

New Hampshire was the first state to operate a lottery in the twentieth century, starting in 1964 with a weekly game called "Granite State Lottery."

Question 3

Which of the following is a logical reason for a state to implement a lottery as a way to increase state revenue?&#10;A) Lottery funds usually bring in a large share of the state's total revenue.&#10;B) Lottery revenue provides a stable source of funds that can be used as the fiscal base for important social programs.&#10;C) Lotteries have low administrative costs because private vendors sell all the tickets.&#10;D) Lotteries are a way for the state to receive money from its citizens without levying a tax.

Accepted Answer

Lotteries allow states to generate revenue from voluntary participation rather than through compulsory taxation, making it a non-tax revenue source. This is appealing as it does not force citizens to contribute but rather offers a chance to participate in a game of chance.

Question 4

User charges link funds produced to particular public services-individuals pay only for the services they actually use. Why doesn't all government funding come from such freewill transactions and market exchange?

A) User charges cannot provide a way to reflect demand for a service.
B) Some services have non-appropriable characteristics.
C) Some services are produced in systems showing economies of scale.
D) None of the above.

Accepted Answer

Some services have non-appropriable characteristics, meaning that they cannot be confined to a single individual or group and are available to everyone regardless of whether they pay for them or not. Examples include national defense and policing, which benefit society as a whole and cannot be tied directly to individual use. In such cases, user charges would not be an appropriate way to fund these services.

Question 5

Which of the following is an accurate statement about state lotteries?&#10;A) Because of individual demand for gambling, lottery proceeds are stable from year to year and easily predictable.&#10;B) Compared to other sources of state revenue, the cost of raising revenue from a lottery is quite low per dollar raiseD)&#10;C) Because of broad participation rates through all income classes, the burden of the lottery is equivalent to that of a proportional tax.&#10;D) Earmarking of lottery proceeds for specific purposes, i.e., for primary and secondary education, has not always increased state spending for those purposes.

Accepted Answer

Lottery proceeds are often earmarked for specific purposes, such as education, but studies have shown that this does not always lead to an increase in state spending for those purposes. Instead, the state may reduce the amount allocated from the general fund, resulting in no net increase in funding for the earmarked purpose.

Deck 12: Revenue From User Fees, User Charges, and Sales by Public Monopolies