Exam 12: The Design of the Tax System

When the marginal tax rate exceeds the average tax rate, the tax is:

An income tax in which the average tax rate increases as taxpayer income increases would be considered a:

If the government imposes a tax of 20 per cent on the first $20 000 of income and 40 per cent on all incomes above $20 000, a person whose income is $30 000 would face a tax liability of $8000.

A tax on all forms of income will:

Tax evasion is another term for tax avoidance.

The average tax rate of a taxpayer is only likely to equal the marginal tax rate when the taxpayer:

If vertical equity is being used as the basis of a tax, then taxpayers with a lesser ability to pay should:

The marginal tax rate is:

Deadweight losses from taxation are equal to:

Tax incidence is:

With a lump-sum tax, the:

'Vertical equity' refers to the idea that taxpayers with similar abilities to pay taxes should pay the same amount.

An efficient tax system is one that generates a lot of revenue even if the administrative burden is high.

Company income is taxed three times: first when the corporation earns profits; second when the bondholders pay tax on interest income; and third when individuals pay tax on company dividends.