Exam 12: The Design of the Tax System

Suppose the government imposes a tax of 10 percent on the first $40,000 of income and 20 percent on all income above $40,000.What are the tax liability and the marginal tax rate for a person whose income is $30,000?

Scenario 12-1 Suppose Jim and Joan receive great satisfaction from their consumption of cheesecake. Joan would be willing to purchase only one slice and would pay up to $6 for it. Jim would be willing to pay $9 for his first slice, $7 for his second slice, and $3 for his third slice. The current market price is $3 per slice. -Refer to Scenario 12-1.Assume that the government places a $4 tax on each slice of cheesecake and that the new equilibrium price is $7.What is Joan's consumer surplus from cheesecake?

Tax evasion is

Table 12-9 -Refer to Table 12-9.A lump-sum tax is illustrated by tax

Which of the following contributes to the projected rise in government spending on Social Security and Medicare as a percentage of GDP?

The average American pays a higher percent of his income in taxes today than he would have in the late 18th century.

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.George earns $40,000,and Elaine earns $60,000.Which of the following statements is correct?

Which tax system requires all taxpayers to pay the same percentage of their income in taxes?

The payroll tax differs from the individual income tax because the payroll tax is primarily earmarked to pay for

Vertical equity in taxation refers to the idea that people

You are trying to design a tax system that will simultaneously achieve both of the following goals: 1)a person with no income would pay no taxes,and 2)a high-income person would pay a higher fraction of income in taxes than a low-income person.Which of the following statements is correct?

Which of the following in not a reason that a lump-sum tax imposes a minimal administrative burden on taxpayers?

Rate these taxes as sources of revenue to the federal government from most to least important.

Table 12-1 -Refer to Table 12-1.If Chris has $100,000 in taxable income,his tax liability will be

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

Like spending on Social Security,the share of federal government spending on Medicare has risen substantially over time.This is most likely a result of

The largest source of revenue for the federal government is the

The single largest expenditure by state and local governments is on

Suppose the government imposes a tax of 10 percent on the first $40,000 of income and 20 percent on all income above $40,000.What are the tax liability and the marginal tax rate for a person whose income is $50,000?

If a tax system is designed so that individuals with similar incomes pay similar taxes,the system achieves vertical equity.