Question 1

The marginal tax rate is

Accepted Answer

The marginal tax rate is the increase in taxes as a percentage of the increase in income. In other words, it is the tax rate on the last dollar earned. It is not the sum of all individual tax rates (A), the total taxes paid as a percentage of total income (B), or the average tax rate paid by both individuals and corporations (C).

Question 2

The tax base is

Accepted Answer

The tax base is the value of all goods, services, incomes, or wealth subject to taxation. It is the starting point for determining the amount of tax revenue that will be collected by the government. A broader tax base typically allows for lower tax rates, while a narrower tax base may require higher tax rates to generate the same amount of revenue.

Question 3

The U.S. Social Security tax is an example of a

Accepted Answer

The U.S. Social Security tax is regressive because it is based on a fixed percentage (currently 6.2%) of an individual's income up to a certain limit ($137,700 in 2020). This means that low-income earners pay a higher percentage of their income towards Social Security taxes compared to high-income earners.

Question 4

When income is $15,000, the amount of income income taxes owed is $2,000; when income increases to $20,000, the amount owed increases to $3,000. The marginal tax rate in this case is

Accepted Answer

The marginal tax rate is calculated by dividing the change in taxes owed by the change in income. Here, taxes increase by $1,000 ($3,000 - $2,000) when income increases by $5,000 ($20,000 - $15,000). Thus, the marginal tax rate is $1,000 / $5,000 = 0.20, or 20 percent.

Question 5

If a tax system is progressive, then

Accepted Answer

In a progressive tax system, the marginal tax rate increases as income rises. This means that people with higher incomes pay a higher percentage of their income in taxes. As a result, the marginal tax rate is always greater than the average tax rate.

Question 6

In a progressive income tax system,

Accepted Answer

In a progressive income tax system, the marginal tax rate increases as the income of the taxpayer increases. This means that the higher the income, the higher the percentage of income that is paid in taxes. The average tax rate is the total amount of taxes paid divided by the total income earned. Since the marginal tax rate increases as income increases, the average tax rate will also increase, but not as much as the marginal tax rate. Therefore, the marginal tax rate exceeds the average tax rate in a progressive income tax system.

Question 7

If you were to face a marginal tax rate of 15 percent, how much would your tax bill increase when your income increased by $2,000?

Accepted Answer

A marginal tax rate of 15 percent means that for every additional dollar earned, 15 cents will go towards taxes. Therefore, if your income increases by $2,000, your tax bill will increase by 15% of $2,000 which equals $300.

Question 8

Another name for a "flat-rate tax" in which the same tax rate applies to all income earners is a

Accepted Answer

A flat-rate tax is also known as a proportional tax because the same percentage rate applies to all income earners, regardless of how much they earn. This means that everyone pays the same proportion of their income in taxes.

Question 9

Suppose you are making $50,000 per year and paying $5,000 per year in income taxes. You get a $10,000 per year raise and your income taxes are now $6,000 per year. Based on this information, the income tax system is

Accepted Answer

The answer of Suppose you are making $50,000 per year...

Question 10

-Using the above figure, which of the lines in the above diagram represents a progressive tax?

Accepted Answer

The answer of 
-Using the above figure, which of the...

Question 11

Suppose you are making $50,000 per year and paying $5,000 per year in income taxes. You get a $10,000 per year raise and your income taxes are now $6,500 per year. Based on this information, the income tax system is

Accepted Answer

As your income increased, your tax rate increased as well, indicating a progressive tax system.

Question 12

Mr. Johnson earns $100,000 per year. Each year he spends $70,000 and saves $30,000. He pays a 5 percent sales tax on all of his spending. Assuming this is the only tax he pays, his average tax rate out of his income is

Accepted Answer

The answer of Mr. Johnson earns $100,000 per year. Each...

Question 13

Jamal earns $160,000 per year and Josephina earns $80,000 per year. If Jamal pays $16,000 in income taxes and Josephina pays $8,000 in income taxes, the income tax system would be

Accepted Answer

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

Question 14

When income is $15,000, the amount of income taxes owed is $2,000; when income increases to $20,000, the amount owed increases to $3,000. The average income tax rate when a person earns $15,000 is

Accepted Answer

Average income tax rate is calculated by dividing the amount of income tax owed by the taxable income. 
For income of $15,000, the average tax rate is $2,000/$15,000 = 0.133 or 13.3%.
Option A is incorrect because a tax rate of 75% would mean that $11,250 out of $15,000 is being paid in taxes, which is not the case.
Option B is incorrect because $2,000 is not 15% of $15,000.
Option D is incorrect because $3,000 is not 20% of $15,000.

Question 15

Assume that Mr. Smith's income increased from $40,000 last year to $45,000 this year and that he paid an additional $2,000 in taxes. This would indicate that his marginal tax rate is

Accepted Answer

The answer of Assume that Mr. Smith's income increased from...

Question 16

-Using the above figure, which of the lines in the above diagram represents a regressive tax?

Accepted Answer

The answer of 
-Using the above figure, which of the...

Question 17

The Social Security tax is considered to be a

Accepted Answer

The Social Security tax is a regressive tax because it is levied at a fixed percentage on wages up to a certain amount (as of 2021, the limit is $142,800). This means that individuals who earn less money are likely to pay a higher percentage of their income in Social Security taxes than those who earn more money. Therefore, it is regressive in nature.

Question 18

Jamal earns $160,000 per year and Josephina earns $80,000 per year. If Jamal pays $16,000 in income taxes and Josephina pays $5,000 in income taxes, the income tax system would be

Accepted Answer

A progressive tax system is one in which the tax rate increases as income increases. Since Jamal, who earns more, pays a higher amount in taxes than Josephina, the system is progressive. If the tax system were regressive, Josephina would be paying a higher percentage of her income in taxes than Jamal. If it were proportional, both individuals would be paying the same percentage of their income in taxes regardless of their income level. If it were marginal, it would refer to the tax rate applicable to the last dollar earned, rather than the overall tax rate.

Question 19

Jamal earns $160,000 per year and Josephina earns $80,000 per year. They both pay the same price to buy the identical automobile and each pays $1,600 in sales tax. In relation to their relative incomes, this is an example of a

Accepted Answer

A regressive tax takes a larger percentage of income from low-income earners than from high-income earners. Since Jamal and Josephina pay the same amount in sales tax despite their different incomes, the tax is regressive relative to their incomes.

Question 20

-Using the above figure, which of the lines in the above diagram represents a proportional tax?

Accepted Answer

The answer of 
-Using the above figure, which of the...

Quiz 6: Funding the Public Sector

The marginal tax rate is

The tax base is

The U.S. Social Security tax is an example of a

When income is $15,000, the amount of income income taxes owed is $2,000; when income increases to $20,000, the amount owed increases to $3,000. The marginal tax rate in this case is

If a tax system is progressive, then

In a progressive income tax system,

If you were to face a marginal tax rate of 15 percent, how much would your tax bill increase when your income increased by $2,000?

Another name for a "flat-rate tax" in which the same tax rate applies to all income earners is a

Suppose you are making $50,000 per year and paying $5,000 per year in income taxes. You get a $10,000 per year raise and your income taxes are now $6,000 per year. Based on this information, the income tax system is

-Using the above figure, which of the lines in the above diagram represents a progressive tax?

Suppose you are making $50,000 per year and paying $5,000 per year in income taxes. You get a $10,000 per year raise and your income taxes are now $6,500 per year. Based on this information, the income tax system is

Mr. Johnson earns $100,000 per year. Each year he spends $70,000 and saves $30,000. He pays a 5 percent sales tax on all of his spending. Assuming this is the only tax he pays, his average tax rate out of his income is

Jamal earns $160,000 per year and Josephina earns $80,000 per year. If Jamal pays $16,000 in income taxes and Josephina pays $8,000 in income taxes, the income tax system would be

When income is $15,000, the amount of income taxes owed is $2,000; when income increases to $20,000, the amount owed increases to $3,000. The average income tax rate when a person earns $15,000 is

Assume that Mr. Smith's income increased from $40,000 last year to $45,000 this year and that he paid an additional $2,000 in taxes. This would indicate that his marginal tax rate is

-Using the above figure, which of the lines in the above diagram represents a regressive tax?

The Social Security tax is considered to be a

Jamal earns $160,000 per year and Josephina earns $80,000 per year. If Jamal pays $16,000 in income taxes and Josephina pays $5,000 in income taxes, the income tax system would be

Jamal earns $160,000 per year and Josephina earns $80,000 per year. They both pay the same price to buy the identical automobile and each pays $1,600 in sales tax. In relation to their relative incomes, this is an example of a

-Using the above figure, which of the lines in the above diagram represents a proportional tax?