Question 1

The corporate income tax in Canada
A)excludes dividends paid out.
B)results in individuals being double-taxed on corporate earnings.
C)only taxes retained earnings.
D)does not apply to profits earned on exports.

Accepted Answer

Corporate income tax in Canada taxes corporate earnings, and when these earnings are distributed as dividends to shareholders, they are taxed again at the individual level, leading to double taxation.

Question 2

The distribution of tax burdens among various groups in society is referred to as
A)zero-base budgeting.
B)sectioning.
C)regressive placement.
D)tax incidence.

Accepted Answer

Tax incidence refers to the way that the burden of a tax is distributed among different groups in society. A tax may be considered regressive if the burden falls more heavily on lower-income individuals, or progressive if it falls more heavily on higher-income individuals. The term "zero-base budgeting" refers to a budgeting technique where each budget item is evaluated without reference to past expenditures, while "sectioning" is not a term commonly used in discussions of taxation.

Question 3

What is the free-rider problem and how is it related to public goods?

Accepted Answer

The answer of What is the free-rider problem and how...

Question 4

Corporate profits are taxed
A)at too low a rate.
B)three times once by the corporate tax system,again by the personal tax system,and again as capital gains.
C)twice once by the corporate tax system and again by the personal tax system when they are paid to stockholders as dividends.
D)only when a stockholder sells his or her shares of stock.

Accepted Answer

Corporate profits are taxed twice - first at the corporate level, and then again when they are paid to stockholders as dividends, which are subject to personal income taxes. This double taxation can result in a higher overall tax burden for companies and their shareholders. However, it should be noted that not all corporate profits are paid out as dividends, and shareholders can also benefit from the capital gains tax rate if they sell their shares for a profit.

Question 5

Tax incidence refers to
A)determining who sends the taxes into the government.
B)the tendency of some people to avoid paying taxes at all.
C)the distribution of tax burdens among groups.
D)determining the marginal tax rate applied to any increase in income.

Accepted Answer

Tax incidence refers to the distribution of tax burdens among different groups, such as consumers, producers, and workers. It is about who bears the ultimate cost of the tax, regardless of who officially sends the tax to the government. Tax incidence analysis can help policymakers understand how different tax policies may affect different groups or markets and whether the burden of the tax falls on those who can afford it. Therefore, option C is the correct choice as it defines tax incidence accurately.

Question 6

The main source of receipts for the federal government is
A)individual income tax.
B)excise tax on gasoline and alcohol.
C)corporate income tax.
D)GST/HST revenues.

Accepted Answer

According to the Government of Canada's Fiscal Reference Tables, the largest source of federal government revenue in 2019-2020 was individual income tax, accounting for 48.4% of total revenue. Excise taxes on gasoline and alcohol accounted for only 2.4%, corporate income tax for 13.1%, and GST/HST revenues for 12.8%.

Question 7

The largest source of receipts for the Canadian federal government is
A)corporate income taxes.
B)personal income taxes.
C)capital gains taxes.
D)import duties.

Accepted Answer

Personal income taxes make up the largest source of receipts for the Canadian federal government. As of 2021, it accounted for approximately 50% of all government revenue. This revenue is collected from individuals based on their earned income, rental income, and investment income.

Question 8

The choice between a proportional,progressive or regressive tax will typically be
A)independent of concerns for fairness.
B)based on efficiency concerns.
C)based on the desire to foster economic growth.
D)based on normative concerns.

Accepted Answer

The choice between different types of taxes is often based on normative concerns, which involve judgments about what is fair or equitable in society.

Question 9

A flat tax with an exemption for the first $20,000 of family income and a constant tax rate would be
A)a proportional tax.
B)a regressive tax.
C)a progressive at low incomes and regressive at high incomes.
D)a progressive tax.

Accepted Answer

The flat tax with an exemption for the first $20,000 of family income and a constant tax rate would be a progressive tax because it exempts a portion of income and would require higher earners to pay a higher percentage of their income in taxes than lower earners.

Question 10

How do public goods differ from a merit goods?

Accepted Answer

The answer of How do public goods differ from a...

Question 11

A consumption tax with an exemption for the first $20,000 of family consumption and a constant tax rate beyond that would be
A)a proportional tax.
B)a regressive tax.
C)a progressive tax at low incomes and a regressive tax at high incomes.
D)a progressive tax.

Accepted Answer

The answer of A consumption tax with an exemption for...

Question 12

A national sales tax with a constant percentage tax rate would be
A)progressive.
B)progressive at low incomes and proportional at high incomes.
C)proportional.
D)regressive.

Accepted Answer

A national sales tax would be regressive, as lower-income individuals would have to spend a larger portion of their income on the tax compared to higher-income individuals who can afford to save more of their income.

Question 13

In Canada,proponents of a flat tax system replacing the current progressive income tax system argue that
I.A flat tax system would result in higher savings and investment.
II.A flat tax system would result in more economic growth.
A)I only
B)II only
C)Both I and II
D)Neither I nor II

Accepted Answer

Proponents of a flat tax system argue that a simpler tax system would encourage savings and investment as people would be able to keep more of their income. Additionally, they argue that a flat tax system would create more economic growth by reducing the tax burden on businesses and individuals, which would allow them to allocate more resources towards productive activities. Both of these arguments support the implementation of a flat tax system over the current progressive income tax system in Canada.

Question 14

The distribution of tax burdens among various groups in society is known as
A)tax incidence.
B)tax avoidance.
C)capital gains.
D)double taxation.

Accepted Answer

Tax incidence refers to the distribution of tax burdens among various groups in society, taking into account how the tax affects different parties such as consumers, producers, and the government. Tax avoidance, capital gains, and double taxation are related concepts but are not synonymous with tax incidence.

Question 15

Income is taxed twice with respect to
A)corporate profits only.
B)shareholder dividends only.
C)both corporate profits and shareholder dividends.
D)neither profits nor dividends since the 1986 Tax Reform Act eliminated double taxation.

Accepted Answer

Both corporate profits and shareholder dividends are taxed twice. The corporation pays taxes on its profits at the corporate tax rate, and then the shareholders pay taxes on their dividends at their individual tax rates. However, it is worth noting that some businesses may elect to be taxed as pass-through entities, in which case their profits are only taxed once at the individual level.

Question 16

Some economists argue for a ________ tax instead of the personal income tax because it would encourage more saving.
A)consumption
B)capital gains
C)corporate income
D)property

Accepted Answer

A consumption tax would encourage individuals to save instead of spending, as every time they make a purchase, they would be taxed. This could lead to higher savings rates and potentially more investment in the economy.

Question 17

A consumption tax would
A)discourage saving because individuals would only pay taxes on income they spend.
B)be progressive because everyone would be subject to the same tax system.
C)be proportional because everyone would be subject to the same tax system.
D)be progressive or regressive depending on the structure of the tax system.

Accepted Answer

A consumption tax can be structured in a way that is either progressive or regressive, depending on whether it disproportionately affects lower-income or higher-income individuals. Therefore, option D is the correct choice. Option A is incorrect because a consumption tax may encourage individuals to save since they will not be taxed on their savings, and option B is incorrect because a consumption tax is not necessarily progressive simply because everyone is subject to the same tax system. Option C is partially correct because everyone would indeed be subject to the same tax system, but it does not address the issue of progressivity or regressivity.

Question 18

The idea behind a progressive tax system is that it is fair that
A)taxpayers with higher incomes pay smaller shares of their incomes in taxes.
B)taxpayers with higher incomes pay higher taxes.
C)taxpayers with higher incomes pay greater shares of their incomes in taxes than those with lower incomes.
D)taxpayers with higher incomes pay the same shares of their incomes in taxes as those with lower incomes.

Accepted Answer

A progressive tax system seeks to distribute the tax burden in a way that reflects the ability to pay. As such, those with higher incomes pay a greater share of their income in taxes than those with lower incomes. This is seen as fair as it recognizes that those with higher incomes have greater resources and can afford to contribute a greater share to society through taxation.

Question 19

Assuming wealthier people are more likely to experience capital gains than poor people,a tax system that applies a lower rate to this type of income is likely to be
A)progressive.
B)proportional.
C)regressive.
D)unfair to the poor.

Accepted Answer

A tax system that applies a lower rate to capital gains income is regressive because it benefits the wealthy more than the poor. The wealthy are more likely to earn income from capital gains, so a lower tax rate on this income benefits them more than the poor. This increases the income gap between the rich and poor, making the tax system unfair to the poor.

Question 20

A consumption tax would
A)encourage saving because individuals would only pay taxes on income they spend.
B)be progressive because everyone would be subject to the same tax system.
C)be progressive because higher income people spend more than lower income people.
D)be proportional because everyone would be subject to the same tax system.

Accepted Answer

A consumption tax would only tax individuals on the income they spend, not the income they save. Therefore, people would be encouraged to save more, which is typically a positive thing for individuals and the economy. However, the other options (B, C, and D) are incorrect because a consumption tax is not necessarily progressive or proportional, nor would everyone be subject to the same tax system.

Quiz 10: The Public Sector

The corporate income tax in Canada

The distribution of tax burdens among various groups in society is referred to as

What is the free-rider problem and how is it related to public goods?

Corporate profits are taxed

Tax incidence refers to

The main source of receipts for the federal government is

The largest source of receipts for the Canadian federal government is

The choice between a proportional,progressive or regressive tax will typically be

A flat tax with an exemption for the first $20,000 of family income and a constant tax rate would be

How do public goods differ from a merit goods?

A consumption tax with an exemption for the first $20,000 of family consumption and a constant tax rate beyond that would be

A national sales tax with a constant percentage tax rate would be

In Canada,proponents of a flat tax system replacing the current progressive income tax system argue that I.A flat tax system would result in higher savings and investment. II.A flat tax system would result in more economic growth.

The distribution of tax burdens among various groups in society is known as

Income is taxed twice with respect to

Some economists argue for a ________ tax instead of the personal income tax because it would encourage more saving.

A consumption tax would

The idea behind a progressive tax system is that it is fair that

Assuming wealthier people are more likely to experience capital gains than poor people,a tax system that applies a lower rate to this type of income is likely to be

A consumption tax would