Exam 12: The Design of the Tax System

Suppose that the government taxes income in the following fashion: 20 percent of the first $50,000, 40 percent of the next $50,000, and 60 percent of all income over $100,000. Marshall earns $200,000, and Lily earns $600,000. Which of the following statements is correct?

If New York City imposed a 50 cent tax on soft-drink beverages that contain sugar or high-fructose corn syrup, it would

What are the two largest categories of federal tax receipts?

Scenario 12-5 Senator Filch argues that a tax must be paid by people who benefit from government services. Senator Fudge argues that a tax must be paid in accordance with a person's ability to bear the tax burden. Senator Malfoy argues that people with a greater ability to pay a tax should pay a larger amount. Senator Moody argues that taxpayers with similar abilities to pay should contribute the same amount. -Refer to Scenario 12-5. Which Senator is advocating taxes based on a person's ability to pay?

Suppose that Christine values a baseball hat at $20, and Mark values one at $18. The pretax price of a baseball hat is $14. The government imposes a $5 tax on baseball hats, which raises the price to $19. What is the deadweight loss from the tax?

In many cases, tax loopholes are designed by Congress to

State and local governments

Table 12-21 The dollar amounts in the last three columns are the taxes owed under the three different tax systems. -Refer to Table 12-21. Which of the three tax systems is progressive?

One advantage of a lump-sum tax over other taxes is that it

Most economists believe that a corporate income tax affects the stockholders of a corporation but not its employees or customers.

Tim earns income of $60,000 per year and pays $21,000 per year in taxes. Tim paid 20 percent in taxes on the first $30,000 he earned. What was the marginal tax rate on the second $30,000 he earned?

A tax on all forms of income will

Table 12-24 -Refer to Table 12-24. The tax system is an example of a tax.

The two types of taxes that are most important to state and local governments as sources of revenue are

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

According to the benefits principle, it is fair for people to pay taxes based on the benefits they receive from the government.

Vertical and horizontal equity are widely accepted and applying them to evaluate a tax system is always straightforward.

A budget surplus occurs when government receipts exceed government spending.

The largest budgetary expense for a typical state or local government is

The largest category of expenditures for state and local governments is .