Exam 17: Taxation and Resource Allocation

When a tax is imposed on an item, it can generally be said that the incidence of the tax is

The allocation of tax burden

In 1984, the South Carolina State Supreme Court ruled that a 20 percent admission tax on X-rated movies was unconstitutional. When the affected cinemas sought a refund of collected taxes, they were denied on the grounds that the tax, although collected by the theater, was indeed paid by the theatergoers. The Supreme Court apparently believed

A progressive income tax system can be defined as one in which

Loopholes reduce the efficiency of the tax system.

Payroll tax is a proportional tax.

The exemption of municipal bond interest income from federal personal income taxes

The payroll tax is the federal government's biggest source of revenue.

Federal tax loopholes in personal income tax provide benefits only to very high-income people.

The incidence of a payroll tax is borne by both employers and employees.

Who bears the burden of an excise tax if demand is perfectly inelastic? What if supply is perfectly inelastic? Use graphs in your explanation.

In which of the following examples is excess burden not present?

The average tax rate is

Figure 18-2 Figure 18-2 shows the widget market before and after an excise tax is imposed. The tax per widget equals ____.

Employers can shift payroll taxes by substituting capital for labor.

Which of the following is not true for the U.S. payroll tax?

Payments to Social Security recipients would decline if the retirement age were lowered.

The benefits principle states that those who

A tax that reduces economic efficiency is always bad policy.

The concept that describes the situation where the economy has used every available opportunity to make someone better off without making someone else worse off is