Exam 12: The Design of the Tax System

Taxes can be justified if the government uses the revenue to (i) provide public goods such as national defense. (ii) clean up negative externalities such as water pollution. (iii) regulate a common resource such as fish in a public lake. (iv) provide goods with positive externalities such as medical research.

Vertical equity is not consistent with a regressive tax structure.

A transfer payment is a government payment

A family's tax liability is the amount of money it owes in taxes.

In order to determine tax incidence, one must

If Mary earns $80,000 in taxable income and pays $40,000 in taxes, her marginal tax rate must be 50 percent.

Maurice faces a progressive federal income tax structure that has the following marginal tax rates: 0 percent on the first $10,000, 10 percent on the next $10,000, 15 percent on the next $10,000, 25 percent on the next $10,000, and 50 percent on all additional income. In addition, he must pay 5 percent of his income in state income tax and 15.3 percent of his labor income in federal payroll taxes. Maurice earns $60,000 per year in salary and another $10,000 per year in non-labor income. What is his average tax rate?

Which of the following statements about state income taxes is correct?

Table 12-10 -Refer to Table 12-10. If Miss Kay has $80,000 in taxable income, her marginal tax rate is

If your income is $50,000, your income tax liability is $10,000, and you paid $0.25 in taxes on the last dollar you earned, your

Table 12-11 -Refer to Table 12-11. If Al has taxable income of $165,000, his average tax rate is

When the total surplus lost as a result of a tax is less than the amount of tax revenue collected by the government there is a deadweight loss.

The U.S. federal government spends its revenues in a number of ways. Rank the following spending categories from largest to smallest.

Table 12-12 -Refer to Table 12-12. If the government imposes a $2,000 lump-sum tax, the average tax rate for Marcia and Charles would be

If tax revenues from a tax on fried foods are used to pay for healthcare expenses related to cardio-vascular diseases, the fried foods tax could be justified using the .

If a tax takes a smaller fraction of income as income rises, it is

How can a proportional tax achieve vertical equity?

Changing the basis of taxation from income earned to amount spent will

The theory that the wealthy should contribute more to police protection than the poor because they have more to protect is based on

Table 12-20 The following table presents the total tax liability for an unmarried taxpayer under four different tax schedules for the income levels shown. -Refer to Table 12-20. Which tax schedules are proportional?