Question 1

Consider two people, Sandy Ross, who earns $25,000, and Gary Belcher, who earns $50,000. If the flat-tax rate is 20 percent, then:
A) the government collects a total of $20,000.
B) Gary pays twice the tax amount Sandy pays.
C) Gary pays three times the tax amount Sandy pays.
D) Gary and Sandy pay exactly the same tax amount.
E) Gary pays $15,000 in taxes.

Accepted Answer

Sandy pays 20% of $25,000, which is $5,000. Gary pays 20% of $50,000, which is $10,000. Therefore, Gary pays twice the tax amount Sandy pays.

Question 2

Exhibit 16-4  Marginal tax rate lines  In Exhibit 16-4, line A represents a(n):
A) regressive tax.
B) progressive tax.
C) proportional tax.
D) ability-to-pay tax.

Accepted Answer

The answer of Exhibit 16-4  Marginal tax rate lines  In...

Question 3

Which of the following statements is true ?
A) The most important source of revenue to the federal government is personal income taxes.
B) The most important source of revenue to state governments are sales and property taxes.
C) The most important source of revenue to local governments are local property taxes.
D) The taxation burden, measured by taxes as a percentage of GDP, is lighter in the United States than in most other advanced industrial countries.
E) All of the above.

Accepted Answer

A) Personal income taxes are the largest source of federal revenue, according to the Congressional Budget Office.
B) Sales and property taxes are the two largest sources of state and local government revenue, respectively, according to the National Association of State Budget Officers.
C) Local property taxes are the largest source of revenue for local governments, according to the National Conference of State Legislatures.
D) Taxation burden in the United States is lighter than many other advanced industrial countries, according to the Organization for Economic Cooperation and Development (OECD).

Question 4

Which of the following can be classified as a regressive tax?
A) Excise tax.
B) Sales tax.
C) Gasoline tax.
D) All of the above.

Accepted Answer

All of the above taxes can be classified as regressive because they tend to take a larger percentage of income from lower-income individuals as compared to higher-income individuals. This is because lower-income individuals spend a higher percentage of their income on these types of goods and services, while higher-income individuals have a greater ability to shift their spending towards non-taxed or less heavily taxed items.

Question 5

Consider two people, Sandy Smith, who earns $25,000, and Gary Carver, who earns $50,000. If the government has decided to tax everyone's first $25,000 at 20 percent and everyone's second $25,000 at 40 percent, then:
A) Gary and Sandy both pay taxes of the same percentage of total income.
B) Gary and Sandy pay the same amount of taxes.
C) Gary pays twice the tax amount Sandy pays.
D) Gary pays three times the tax amount Sandy pays.
E) Sandy does not pay taxes.

Accepted Answer

The answer of Consider two people, Sandy Smith, who earns...

Question 6

Jan has an income of $30,000 and pays $4,500 in taxes. When Jan's income rises to $40,000, her tax bill rises to $6,500. What is Jan's marginal tax rate?
A) 5 percent.
B) 15 percent.
C) 16.25 percent.
D) 20 percent.

Accepted Answer

Marginal tax rate = (change in tax bill) / (change in income)

Marginal tax rate = ($6,500 - $4,500) / ($40,000 - $30,000)

Marginal tax rate = $2,000 / $10,000

Marginal tax rate = 0.2 or 20%

Question 7

Jose pays a tax of $24,000 on his income of $60,000, while Richard pays a tax of $3,000 on his income of $30,000. This tax is:
A) a flat tax.
B) progressive.
C) proportional.
D) regressive.

Accepted Answer

A progressive tax means that the more you earn, the higher percentage of your income you pay in taxes. In this scenario, Jose paid a higher percentage of his income in taxes compared to Richard, indicating that the tax system is progressive.

Question 8

Some cities finance their airports with a departure tax: every person leaving the city by plane is charged a small fixed dollar amount that is used to help pay for building and running the airport. The departure tax follows the:
A) benefits-received principle.
B) ability-to-pay principle.
C) flat-rate taxation principle.
D) public-choice principle.

Accepted Answer

The departure tax follows the benefits-received principle, as it charges only those who are using the airport and benefiting from the airport, rather than charging all citizens regardless of their use of the airport.

Question 9

A tax where wealthy people pay a larger percentage of their income than poor people is known as a(n):
A) excise tax.
B) flat tax.
C) proportional tax.
D) progressive tax.
E) regressive tax.

Accepted Answer

A progressive tax system is one where individuals with higher income pay a higher percentage of their income in taxes than individuals with lower income. This is the opposite of a regressive tax system where individuals with lower income pay a higher percentage of their income in taxes. A flat tax system is where everyone pays the same percentage of their income in taxes, while a proportional tax system is where everyone pays the same dollar amount in taxes regardless of their income level. An excise tax is a tax on specific goods or services like gasoline, tobacco, or alcohol.

Question 10

A progressive tax means the percentage of income paid as taxes:
A) increases as income increases.
B) decreases as income increases.
C) remains the same as income increases.
D) none of the above.

Accepted Answer

A progressive tax system means that the percentage of income paid as taxes increases as income increases. This means that individuals with higher incomes pay a higher percentage of taxes than those with lower incomes. The purpose of a progressive tax system is to promote equity and redistribute wealth by ensuring individuals with higher incomes contribute a larger portion of their income towards public services and programs.

Question 11

Exhibit 16-4  Marginal tax rate lines  In Exhibit 16-4, if A represents state and local taxes and B represents federal income taxes, what is the result of imposing both types of taxes?
A) regressive tax.
B) progressive tax.
C) proportional tax.
D) ability-to-pay tax.

Accepted Answer

The answer of Exhibit 16-4  Marginal tax rate lines  In...

Question 12

Consider two people, Sandy Smith, who earns $25,000, and Gary Carver, who earns $50,000. If the government has decided to tax everyone's first $25,000 at 20 percent and everyone's second $25,000 at 40 percent, then Gary pays:
A) $10,000 in taxes and Sandy pays $5,000 in taxes.
B) $10,000 in taxes and Sandy pays $10,000 in taxes.
C) $15,000 in taxes and Sandy pays $5,000 in taxes.
D) $15,000 in taxes and Sandy pays $10,000 in taxes.
E) $17,000 in taxes and Sandy pays $5,000 in taxes.

Accepted Answer

Gary pays $10,000 in taxes on his first $25,000 (20% * $25,000) and $5,000 in taxes on his second $25,000 (40% * $25,000), for a total of $15,000 in taxes. Sandy pays $5,000 in taxes on her first $25,000 (20% * $25,000) and $0 in taxes on her second $25,000 (40% * $0), for a total of $5,000 in taxes.

Question 13

Exhibit 16-4  Marginal tax rate lines  In Exhibit 16-4, line B represents a:
A) regressive tax.
B) progressive tax.
C) proportional tax.
D) flat tax.

Accepted Answer

Line B represents a progressive tax because the marginal tax rate increases as income increases.

Question 14

When the government levies a tax where everyone is taxed the same fixed percentage of their incomes, this tax is known as a(n):
A) regressive tax.
B) progressive tax.
C) proportional tax.
D) excise tax.
E) luxury tax.

Accepted Answer

A proportional tax is a tax where everyone is taxed the same fixed percentage of their incomes. It is also known as a flat tax.

Question 15

A tax for which the rate varies directly with the income of the person taxed is known as a(n):
A) regressive tax.
B) progressive tax.
C) proportional tax.
D) flat tax.
E) excise tax.

Accepted Answer

A tax for which the rate varies directly with the income of the person taxed is known as a progressive tax. This means that as a person's income increases, their tax rate also increases. This is often done in an effort to generate more revenue from those who can afford to pay more, while providing some relief for lower income individuals.

Question 16

Exhibit 16-4  Marginal tax rate lines  In Exhibit 16-4, line C represents a:
A) regressive tax.
B) progressive tax.
C) proportional tax.
D) ability-to-pay tax.

Accepted Answer

Line C represents a proportional tax, where the tax rate stays the same regardless of the level of income.

Question 17

A tax is structured so that the tax as a percentage of income declines as the level of income increases is called a(n):
A) flat tax.
B) regressive tax.
C) progressive tax.
D) excise tax.

Accepted Answer

The answer of A tax is structured so that the...

Question 18

Suppose a person with an income of $20,000 pays a tax of $2,000. If the tax is progressive, then how large of a tax will a person with an income of $40,000 pay?
A) Exactly $2,000.
B) Between $2,000 and $4,000.
C) Exactly $4,000.
D) More than $4,000.

Accepted Answer

In a progressive tax system, the tax rate increases as income increases. Therefore, a person with an income of $40,000 would pay more than double the tax of a person with an income of $20,000, resulting in a tax greater than $4,000.

Question 19

Which of the following U.S. taxes is the most consistent with the ability-to-pay principle?
A) The excise tax on gasoline.
B) The federal income tax.
C) State sales taxes.
D) The Social Security payroll tax.

Accepted Answer

The federal income tax is the most consistent with the ability-to-pay principle because it is based on the taxpayer's ability to pay, as it is levied on the basis of their income. Those with higher incomes pay a higher percentage of their income in taxes, while those with lower incomes pay a lower percentage. This progressive taxation system aims to ensure that wealthier individuals contribute a higher proportion of their income to the government's revenue.

Question 20

Sales and excise taxes are:
A) progressive.
B) proportional.
C) regressive.
D) fixed-revenue.

Accepted Answer

Sales and excise taxes are regressive because they tend to take a higher percentage of income from low-income individuals compared to high-income individuals. This is because lower-income households spend a larger portion of their income on taxable goods and services, while high-income households have a larger portion of their income available for non-taxable expenditures, such as savings or investments.

Quiz 16: The Public Sector

Consider two people, Sandy Ross, who earns $25,000, and Gary Belcher, who earns $50,000. If the flat-tax rate is 20 percent, then:

Exhibit 16-4 Marginal tax rate lines In Exhibit 16-4, line A represents a(n) :

Which of the following statements is true ?

Which of the following can be classified as a regressive tax?

Consider two people, Sandy Smith, who earns $25,000, and Gary Carver, who earns $50,000. If the government has decided to tax everyone's first $25,000 at 20 percent and everyone's second $25,000 at 40 percent, then:

Jan has an income of $30,000 and pays $4,500 in taxes. When Jan's income rises to $40,000, her tax bill rises to $6,500. What is Jan's marginal tax rate?

Jose pays a tax of $24,000 on his income of $60,000, while Richard pays a tax of $3,000 on his income of $30,000. This tax is:

Some cities finance their airports with a departure tax: every person leaving the city by plane is charged a small fixed dollar amount that is used to help pay for building and running the airport. The departure tax follows the:

A tax where wealthy people pay a larger percentage of their income than poor people is known as a(n) :

A progressive tax means the percentage of income paid as taxes:

Exhibit 16-4 Marginal tax rate lines In Exhibit 16-4, if A represents state and local taxes and B represents federal income taxes, what is the result of imposing both types of taxes?

Consider two people, Sandy Smith, who earns $25,000, and Gary Carver, who earns $50,000. If the government has decided to tax everyone's first $25,000 at 20 percent and everyone's second $25,000 at 40 percent, then Gary pays:

Exhibit 16-4 Marginal tax rate lines In Exhibit 16-4, line B represents a:

When the government levies a tax where everyone is taxed the same fixed percentage of their incomes, this tax is known as a(n) :

A tax for which the rate varies directly with the income of the person taxed is known as a(n) :

Exhibit 16-4 Marginal tax rate lines In Exhibit 16-4, line C represents a:

A tax is structured so that the tax as a percentage of income declines as the level of income increases is called a(n) :

Suppose a person with an income of $20,000 pays a tax of $2,000. If the tax is progressive, then how large of a tax will a person with an income of $40,000 pay?

Which of the following U.S. taxes is the most consistent with the ability-to-pay principle?

Sales and excise taxes are: