Exam 12: The Design of the Tax System

​Sonja paid $15,000 in taxes after having earned $100,000. Amanda paid $22,000 in taxes after having earned an income of $146,667.This is an example of a proportional tax.

Table 12-9 Income Amount of Tax \ 50,000 \ 5,000 \ 60,000 \ 5,500 \ 70,000 \ 6,000 -Refer to Table 12-9. The tax system is an example of a __________ tax.

Suppose that the government taxes income in the following fashion: 30 percent of the first $20,000, 50 percent of the next $30,000, and 60 percent of all income over $50,000. Ted earns $40,000, and Robin earns $60,000. Which of the following statements is correct?

Many people consider lump-sum taxes to be unfair to low-income taxpayers.

One characteristic of an efficient tax system is that it minimizes the costs associated with revenue collection.

In 2017, federal government collected $3.6 trillion in taxes. Which of the following correctly rank the sources of federal government tax revenue from large to small?

Scenario 12-2 Suppose Regina and Ben receive great satisfaction from their consumption of cheesecake. Regina would be willing to purchase only one slice and would pay up to $13 for it. Ben would be willing to pay $17 for his first slice, $14 for his second slice, and $10 for his third slice. The current market price is $10 per slice. -Refer to Scenario 12-2. How much total consumer surplus do Regina and Ben collectively receive from consuming cheesecake?

What is the current, annual, approximate amount per person paid to the federal government in individual income taxes, social insurance taxes, corporate income taxes, and other taxes?

Table 12-1 ​ ​ Person Value of a White Water Rafting Trip (Dollars) Ken 150 Alex 120 Brenda 90 Rob 60 -Refer to Table 12-1. Assume that the price of a white water rafting trip pass is $55 and that the price reflects the actual unit cost of the trip. What is the value of the surplus that accrues to all four participants from their trip?

Horizontal equity refers to a tax system in which individuals with higher incomes pay more in taxes than individuals with lower incomes.

The U.S. income tax

An excise tax is a tax on a specific good, like gasoline.

Suppose the government taxes 10 percent of the first $30,000 in income, 20 percent of the next $20,000 in income, and 30 percent of all income over $50,000. Calculate the marginal tax rate and the average tax rate for a person who earns $70,000.

A lump sum tax can never have horizontal equity.

When the government levies a tax on a corporation,

Some states do not have a state income tax.

Table 12-10 -Refer to Table 12-10. Which plan illustrates a proportional tax?

Taxes on specific goods such as gasoline and alcoholic beverages are called

Income taxes and property taxes generate the highest tax revenue for state and local governments.

State and local governments