Exam 12: The Design of the Tax System

In 2010, the co­chairmen of President Obama's deficit reduction commission proposed curtailing or eliminating the mortgage interest deduction that millions of homeowner taxpayers receive every year. Economists who favor the proposal would argue that (i) too much of the economy's capital stock is tied up in residential housing. (ii) too little of the economy's capital stock is invested in corporate capital. (iii) the misallocation of resources results in lower productivity and reduced real wages.

Many people consider lump-sum taxes to be unfair to low-income taxpayers.

In designing a tax system, policymakers have two objectives that are often conflicting. They are

Table 12-7 The following table shows the marginal tax rates for unmarried individuals for two years. -Refer to Table 12-7. For an individual who earned $35,000 in taxable income in both years, which of the following describes the change in the individual's average tax rate between the two years?

Because taxes distort incentives, they typically result in

Which of the following is not an administrative burden of our tax system?

Leonard, Sheldon, Raj, and Penny each like to attend comic-book conventions. The price of a ticket to a convention is $50. Leonard values a ticket at $70, Sheldon at $65, Raj at $60, and Penny at $55. Suppose that if the government taxes tickets at $5 each, the price will rise to $55. A consequence of the tax is that consumer surplus shrinks by

A value-added tax or VAT is a tax on

European countries tend to rely on which type of tax more so than the United States does?

Define the average tax rate.

High marginal income tax rates

In the United States, all families pay the same proportion of their income in taxes.

The government taxes corporate income on the basis of

In the absence of taxes, Carlos would prefer to purchase a large fishing boat with a 75 hp motor. The government has recently decided to place a tax on boats with 75 hp motors or higher. If Carlos decides to purchase a smaller boat with a 50 hp motor as a result of the tax, which of the following statements is correct?

If government spending exceeds government receipts, the government has a

What is the current, annual, approximate amount per person paid to the federal government in individual income taxes, social insurance taxes, corporate income taxes, and other taxes?

Table 12-2 -Refer to Table 12-2. Suppose that the government imposes a $2 tax on delights, causing the price to increase from $4.00 to $6.00. Total consumer surplus will fall from

Table 12-11 -Refer to Table 12-11. If Peggy has taxable income of $43,000, her tax liability is

Which of the following tax systems is the most fair?

Table 12-22 -Refer to Table 12-22. A proportional tax is illustrated by tax