Exam 17: Taxation and Resource Allocation

Two reasons why the Social Security system nearly went bankrupt in the early 1980s are: (i) wages were indexed but benefits were not; (ii) the percentage of elderly people in the country declined.

State and local governments receive money from sales taxes, property taxes, and the federal government.

Loopholes reduce the efficiency of the tax system.

The method of financing the Social Security system until 1983 is best described as

Compared to other countries, the U.S.federal government relies

The main difference between direct and indirect taxes is that

Which of the following is a direct tax?

Edgar Browning and William Johnson, in a paper published in the Journal of Political Economy (1984), presented evidence that a one-dollar transfer to the bottom 40 percent of income distribution costs the top 60 percent nine dollars.If correct, this finding proves

The federal income tax began in the United States with the

A progressive tax is one for which the percentage of each added dollar of income paid in taxes

In practice, turning horizontal and vertical equity into tax law

An excess burden is present when taxpayers alter their behavior on account of taxation.

The ability-to-pay principle is most closely tied to the concept of

Vertical equity refers to the notion that individuals at all levels should be taxed equally.

The total burden of a tax equals tax receipts plus excess burden.

If the demand curve for a product is vertical, then

A $10 fee to obtain a driver's license is a

Sometimes, the taxes with the smallest excess burden are:

The federal income tax is an example of a

Figure 18-3 -In which panel of Figure 18-3 would an excise tax be borne entirely by the consumer?