Deck 12: Taxing and Spending

Question 1

The national government contributes about _____ percent of all state and local expenditures.

A) 25 percent
B) 12.5 percent
C) 40 percent
D) 50 percent

Answer 1

A

Question 2

Which type of tax would most benefit a citizen in a low-income bracket?

A) a regressive tax
B) a flat tax
C) a progressive tax
D) a proportional tax

Answer 2

C

Question 3

The taxable resources of a government jurisdiction are known as

A) countercyclical aid.
B) intergovernmental transfer.
C) tax effort.
D) tax capacity.

Answer 3

D

Question 4

Severance taxes are popular in states that are

A) highly populated.
B) politically conservative.
C) rich in natural resources.
D) politically progressive.

Question 5

A(n) _____ occurs when people demand more government services but do not want to pay for them through higher taxes.

A) intergovernmental transfer
B) expenditure limitation
C) tax-service paradox
D) circuit breaker

Question 6

The extent to which a jurisdiction exploits its taxable resources is known as

A) tax capacity.
B) intergovernmental transfer.
C) tax effort.
D) countercyclical aid.

Question 7

The term _____ refers to the set of political choices that frames economic policy.

A) political economy
B) tax-service paradox
C) intergovernmental transfer
D) merit-system

Question 8

Which of the following is NOT an example of a user fee?

A) income tax
B) trash collection assessments
C) water and sewage charges
D) college tuition

Question 9

Taxes on _____ account for 29 percent of all local government tax revenues.

A) alcohol and tobacco
B) income
C) personal and corporate property
D) prescription drugs

Question 10

When applied to all merchandise, the sales tax is clearly _____, because poor people must spend a larger portion of their incomes than rich people on basics such as food and clothing.

A) proportional
B) progressive
C) elastic
D) regressive

Question 11

The use of circuit breaker legislation on property taxes is intended to

A) provide tax breaks to rental property owners.
B) make those taxes more equitable and more related to the ability to pay.
C) ensure parity in property tax revenues between wealthy and low-income neighborhoods.
D) make tax collection faster and less expensive.

Question 12

Which of the following is a disadvantage of state lotteries?

A) They are costly to administer.
B) They aren't very popular with the public.
C) They can only bring in small sums of money.
D) They increase pressure on major taxes.

Question 13

The movement of money or other resources from one level of government to another is known as

A) own-source revenue.
B) hard money.
C) intergovernmental transfers.
D) soft money.

Question 14

What two basic principles describe state and local financial systems?

A) dependence and continuity
B) interdependence and diversity
C) tradition and continuity
D) diversity and fluidity

Question 15

Which of the following is an advantage of user fees?

A) They are a perfectly appropriate form of regressive taxation.
B) They conform to the ability-to-pay principle.
C) They enjoy a relatively high level of political acceptability.
D) They correspond with the elite theory.

Question 16

Tony lives in a state where low-income residents have to pay a higher percentage of their income to taxes than high-income residents. This is an example of a _____ tax.

A) regressive
B) progressive
C) flat
D) elastic

Question 17

A _____ tax increases as a percentage of a person's income as that income rises.

A) flat
B) regressive
C) elastic
D) progressive

Question 18

Setting specific prices on goods and services provided by state and local governments is a time-proven method that clearly pursues the

A) circuit breaker approach.
B) benefit principle.
C) intergovernmental transfer approach.
D) progressive tax principle.

Question 19

_____ consumes the largest proportion of total state spending.

A) Education
B) Welfare
C) Transportation
D) Health care

Question 20

_____ asserts that taxes should be levied on those who benefit directly from a government service.

A) The proportional principle
B) Elite theory
C) Intergovernmental transfer theory
D) The benefit principle

Question 21

Many states have experienced limited discretion in taxing and spending due to

A) taxation and expenditure limitations (TELs).
B) popular consent to implement a regressive tax structure.
C) a lack of oversight on budgetary decisions.
D) reliance on a single, nondiversified revenue source.

Question 22

There is a close relationship between state wealth (as measured by personal income) and tax effort, which can be measured by tax burden.

Question 23

A regressive tax places a greater burden on the affluent because the tax rate falls as taxable income rises.

Question 24

Casino gambling and Internet betting parlors are now offered in forty states.

Question 25

In 1911, Wisconsin became the first state to implement a personal income tax, which was two years before the federal government enacted its own personal income tax.

Question 26

The general sales tax is a good example of a progressive tax.

Question 27

Stockton, California declared bankruptcy in 2012 for several reasons, including expensive new civic projects developed before the financial crisis and costly wage and benefit agreements.

Question 28

Which of the following is NOT a way that states restrict state and local government borrowing?

A) by tightly restricting general obligation bonds
B) by setting maximum levels of indebtedness
C) by requiring popular referenda to create debt
D) by enforcing user fees

Question 29

State lotteries are a fairly recent phenomenon and came about as a response to the fiscal stress of the 1970s and 1980s.

Question 30

Financial pressure on a government from factors such as revenue shortfalls, and taxing and spending limitations is generally referred to as

A) intergovernmental transfer.
B) fiscal stress.
C) taxation and expenditure limitations (TELs).
D) pass-through spending.

Question 31

The concept of elasticity is demonstrated if, as per capita income grows, revenues also increase without increases in the tax rate.

Question 32

Own-source revenues refer to monies derived by a government from its own taxable resources.

Question 33

In 1978, California voters passed Proposition 13, which significantly raised property taxes and is credited with kicking off a taxpayer revolt across in California

Question 34

In 1998, Congress passed the Internet Tax Freedom Act, which placed a moratorium on taxing Internet transactions. The moratorium has now been lifted, and states are free to tax all items sold on the Internet under each state's sales tax rules.

Question 35

Which of the following bonds is issued to fund the construction of a facility to be used by a private firm?

A) general obligation bond
B) revenue bond
C) industrial development bond
D) excise bond

Question 36

The national government contributes about one-quarter of all state and local revenues; however, more than 60 percent of these federal monies are passed to individual recipients such as those receiving Medicaid.

Question 37

Setting aside fuel taxes for road and highway programs is an example of

A) intergovernmental transfer.
B) gerrymandering.
C) lobbying.
D) earmarking.

Question 38

Having to pay a user fee to use a municipal golf course would be an example of the benefit principle.

Question 39

For years, most states and many local governments have been underfunding the future liabilities of

A) bond banks.
B) employee retirement benefits.
C) rainy day funds.
D) scholarship funds.

Question 40

Most political scientists and economists agree that the most important criteria for evaluating taxes are equity, yield, elasticity, ease of administration, political accountability, and acceptability.

Question 41

Revenue bonds are backed up by expected income from a specific project or service; examples include a toll bridge, a municipal sewer system, or a sports complex.

Question 42

Every state except Vermont is constitutionally or statutorily mandated to balance its budget each fiscal year.

Question 43

Describe the current fiscal challenges to state and local financial systems. How have states and localities dealt with these challenges? Provide specific examples and comment on the future role of interdependency and diversity in financial systems as mechanisms to deal with these fiscal challenges.

Question 44

Fiscal stress refers to financial pressures placed on a government from factors such as revenue shortfalls and taxing, and spending limitations.

Question 45

Why have lotteries and legalized gambling gained favor in terms of sources of revenue? Describe the advantages and disadvantages of such a revenue source. Discuss and defend your position on whether states and localities should rely on such sources.

Question 46

Many criteria can be used to evaluate taxes. Explain three of the most commonly agreed upon criteria. Then use the sales tax, property tax, personal income tax, and lottery to illustrate how these criteria might apply in each instance.

Question 47

The largest expenditure gains in recent years have been in Medicare.

Question 48

The fiscal problems facing states and local governments today are not short-term-they are systemic. Revenue systems are archaic. Some programs are underfunded, while others may have outlived their value but still hang on. Voters want services but often refuse to approve the resources necessary to pay for them. You are running for governor and writing your campaign platform on the principle of transparency and honesty. What do you say?

Question 49

Recessions notwithstanding, many states and localities face chronic fiscal shortfalls because of deep structural problems in their revenue systems.

Question 50

What are the major services for which state and local governments spend the most money? What trends have taken place over the past ten years in terms of areas where spending is growing faster and slower than the average? What factors are influencing these trends? How does this impact taxpayers' willingness to raise or sustain revenues to pay for those programs and services?