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Exam 12: The Design of the Tax System

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Question 71

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Table 12-11 -Refer to Table 12-11. If Al has taxable income of $165,000, his average tax rate is

A) 26.6%.
B) 26.9%.
C) 27.3%.
D) 28.5%.

E) A) and B)
F) B) and D)

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Question 72

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A payroll tax is also referred to as a social insurance tax.

A) True
B) False

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Question 73

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Vertical equity is not consistent with a regressive tax structure.

An advantage of a consumption tax is that it does not distort the incentive to save.

A country is using a proportional tax when

Scenario 12-5 Senator Filch argues that a tax must be paid by people who benefit from government services. Senator Fudge argues that a tax must be paid in accordance with a person's ability to bear the tax burden. Senator Malfoy argues that people with a greater ability to pay a tax should pay a larger amount. Senator Moody argues that taxpayers with similar abilities to pay should contribute the same amount. -Refer to Scenario 12-5. Which Senator is advocating taxes based on the benefits principle?

In 2011, what percentage of federal government receipts came from corporate income taxes?

If all taxpayers pay the same percentage of income in taxes, the tax system is proportional.

In 2010, the co-chairmen of President Obama's deficit reduction commission proposed curtailing or eliminating many tax deductions such as the one for mortgage interest. Economists who favor the proposal argue that it would (i) correct a misallocation of resources because too much of the economy's capital stock is tied up in residential housing and too little is invested in corporate capital. (ii) cut both spending and taxes. (iii) encourage private philanthropy.

Table 12-17 The following table shows the marginal tax rates for unmarried individuals for two years. -Refer to Table 12-17. Which of the following best describes the tax schedule in 2009?

"A $1,000 tax paid by a poor person may be a larger sacrifice than a $10,000 tax paid by a wealthy person" is an argument in favor of

Table 12-2 -Refer to Table 12-2. Suppose that the government imposes a $2 tax on delights, causing the price to increase from $4.00 to $6.00. Total consumer surplus will fall from

The principle that people should pay taxes based on the benefits they receive from government services is called the

Table 12-23 The dollar amounts in the last three columns are the taxes owed under the three different tax systems. -Refer to Table 12-23. Which of the three tax systems is regressive?

In which of the following tax systems do taxes increase as income increases?

An estate tax is an example of a(n)

The amount of income tax owed by a family is

Medicaid is

The United States federal government has a large budget deficit. Long-term projections suggest that under current law, taxes, as a percentage of GDP, will __________ and government spending, as a percentage of GDP, will __________.

The U.S. federal government spends its revenues in a number of ways. Rank the following spending categories from largest to smallest.