Exam 7: Taxes

A regressive tax takes a:

If the marginal tax rate equals the average tax rate, the tax system is:

In the United States, poor people and the middle class pay the largest share of income taxes.

The burden of a tax on a good is said to fall completely on the consumers if the:

Suppose an income tax is levied on none of the first $1,000, 10% of the next $10,000, and 20% of the remainder of earnings. This type of tax can be defined as:

Use the following to answer questions: -(Table: Taxes, Spending, and Income) Look at the table Taxes, Spending, and Income. Suppose Governor Meridias decides to initiate a state tax of 5% on all sales. A poor household will spend _____ of its annual income on the sales tax, while a wealthy household will spend _____ of its annual income.

If demand and supply are both very inelastic, a decrease in the rate of an excise tax will likely:

Under what supply and demand conditions would an excise tax impose a large incidence on suppliers and a small incidence on consumers? Explain how this works.

A tax system achieves equity when:

Use the following to answer questions: Figure: The Market for Yachts -(Figure: The Market for Yachts) Look at the figure The Market for Yachts. If the government imposes a $60,000 tax on yachts (collected from the producers), consumers will pay _____ of the tax and producers will pay _____.

By law, FICA (the Federal Insurance Contributions Act), a payroll tax, is collected equally from employers and employees. In reality:

How does an excise tax impose a cost on society?

If a tax system is well designed:

Some highways and bridges have toll charges. Which principle of tax fairness does this describe?

Use the following to answer questions: Figure: Tax Incidence -(Figure: Tax Incidence) Look at the figure Tax Incidence. All other things unchanged, when a good or service is characterized by a relatively elastic supply, as shown in panel _____, a greater share of the burden of an excise tax is borne by _____.

Use the following to answer questions: Figure: The Shrimp Market -(Figure: The Shrimp Market) Look at the figure The Shrimp Market. If the government wants to limit shrimp sales to 500 pounds, it can impose a _____ excise tax on sellers, and the total tax revenue generated will be _____.

Use the following to answer questions: Figure: The Market for Yachts -(Figure: The Market for Yachts) Look at the figure The Market for Yachts. A price _____ of _____ will bring the about the same price and output in the market for yachts as would an excise tax of $60,000.

Suppose the government imposes a $10 excise tax on the sale of sweaters by charging suppliers $10 for each sweater sold. If the demand curve is downward-sloping and the supply curve is upward-sloping:

An excise tax causes inefficiency if the number of transactions in a market is reduced as a result of the tax. Because the tax discourages mutually beneficial transactions, there is a(n) _____ from a tax.

Suppose the supply of tobacco is elastic and the demand for tobacco is inelastic. If an excise tax is levied on the suppliers of tobacco, will the incidence fall mostly on consumers or mostly on producers? Will there be a large amount or small amount of deadweight loss? Will tax revenue from the tobacco tax fall or rise?