Exam 12: The Design of the Tax System

Table 12-6 The table below shows the marginal tax rates for an unmarried taxpayer for various levels of taxable income. -Refer to Table 12-6. For this tax schedule, what is the average tax rate for an individual with $280,000 in taxable income?

If James earns $80,000 in taxable income and pays $20,000 in taxes, his average tax rate is 25 percent.

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

Taxes create deadweight losses because they

Horizontal and vertical equity are the two primary measures of efficiency of a tax system.

European countries tend to rely more on consumption taxes than does the United States.

From 2009 to 2012, the federal budget deficits were the largest budget shortfalls since World War II. The primary reason for the record-large deficits was

In many cases, tax loopholes are designed by Congress to

In 2011, the U.S. federal government collected approximately what percentage of the taxes in the economy?

The largest category of federal spending is national defense.

Table 12-16 -Refer to Table 12-16. The tax system is

The most efficient tax possible is a

The administrative burden of any tax system is part of the inefficiency it creates.

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 regressive?

Suppose a country imposes a lump-sum income tax of $5,000 on each individual in the country. What is the average income tax rate for an individual who earns $40,000 during the year?

Wilma values a decorative garden rock at $15, while Fred values it at $10. The price of a decorative garden rock is $9. If the government imposes a $2 tax per decorative garden rock and the price of the rock rises to $11, what part of the deadweight loss comes from Wilma, and what part comes from Fred?

When the marginal tax rate exceeds the average tax rate, the tax is

Scenario 12-2 Suppose that Bob places a value of $10 on a movie ticket and that Lisa places a value of $7 on a movie ticket. In addition, suppose the price of a movie ticket is $5. -Refer to Scenario 12-2. Suppose the government levies a tax of $3 on a movie ticket and that, as a result, the price of a movie ticket increases to $8. What is the deadweight loss from the tax?

The "other" category of federal spending consists of many less expensive functions of government, including all of the following except

One reason for the projected increase, over the next several decades, in government spending as a percentage of GDP is the projected increase in the size of the elderly population.