20–21
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Learning Objective: 20–03 List the main categories of federal revenue and spending and
describe the difference between marginal and average tax rates.
Test Bank: I
Topi c :
Federal Finance
Type: Table
41.
Taxable Income
Total Tax
$1,000
$0
2,000
100
3,000
300
4,000
600
5,000
1,000
6,000
1,500
Refer to the income tax schedule given in the table. The tax represented is
A. optimal.
42.
Taxable Income
Total Tax
$1,000
$0
2,000
100
3,000
300
4,000
600
5,000
1,000
6,000
1,500
Refer to the income tax schedule given in the table. If your taxable income is $4,000, your
average tax rate will be
A. 30 percent.
43.
Taxable Income
Total Tax
$1,000
$0
2,000
100
3,000
300
4,000
600
5,000
1,000
6,000
1,500
Refer to the income tax schedule given in the table. If your taxable income increases from
$4,000 to $5,000, you will encounter a marginal tax rate of
D. 10 percent.
20–23
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
describe the difference between marginal and average tax rates.
Test Bank: I
Topi c :
Federal Finance
Type: Table
44. Taxable income is
D. the sum of all wage and property income.
45. The basic tax rate on taxable corporate income is
A. 15 percent.
46. Taxes on commodities or on purchases are known as
A. corporate income taxes.
20–24
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
AACSB: Knowledge Application
A c c e s s i b i l i t y :
Keyboard Navigation
Blooms: Remember
Di f f i c u l t y :
01 Easy
Learning Objective: 20–03 List the main categories of federal revenue and spending and
describe the difference between marginal and average tax rates.
Test Bank: I
Topi c :
Federal Finance
47. Indy currently earns $50,000 in taxable income and pays $8,000 in taxes. Suppose that Indy
faces a marginal tax rate of 25 percent and his boss offers him a raise of $2,000 per year. Indy
should
D. reject the raise because his after-tax income will fall by $6,000.
48. With respect to state finance, for most states
A. estate taxes are the major source of revenue and most expenditures are for health services.
20–25
49. The main difference between sales and excise taxes is that
D. excise taxes are consumption taxes, while sales taxes are not.
50. One difference between sales and excise taxes is that
A. sales taxes are only applied at the state level, while excise taxes are only applied at the
federal level.
51. With respect to local finance,
A. death and gift taxes are the major source of revenue and most expenditures are for hospitals
and health services.
20–26
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
D. sales and excise taxes are the major source of revenue and highway construction and
maintenance is the major type of expenditure.
52. Government lotteries are
D. a form of progressive taxation.
53. Approximately what percentage of local government expenditures goes to finance
education?
A. 36
54. Approximately what percentage of state spending goes to finance education?
20–27
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
A. 36
B. 44
C. 47
D. 53
55. In 2013, U.S. governments (local, state, and federal) employed approximately how many
million workers?
A. 16.0
56. Approximately what percentage of the U.S. labor force works for U.S. governments at the
federal, state, and local levels (as of 2013)?
A. 8
20–28
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Test Bank: I
Topi c :
Local, State, and Federal Employment
57. At the state and local levels of the U.S. government, a majority of government employees
work in which of the following areas?
A. postal service
58. Federal employment in the United States is dominated by what two functions?
D. health care and national defense
59. The ability-to-pay principle of taxation
A. has been declared unconstitutional because it deprives individuals of property without due
process of law.
20–29
60. The benefits-received principle of taxation is most evident in
A. inheritance taxes.
61. Which of the following best reflects the ability-to-pay philosophy of taxation?
A. a tax on residential property
62. Entry fees at national parks and monuments are an example of
20–30
A. the ability-to–pay principle of taxation.
63. The rationale for ability–to-pay taxation and the contention that those with large incomes
should pay more taxes both absolutely and relatively is that
A. high-income receivers are generally in a better position to shift taxes than are low-income
64. Which of the following statements is most consistent with the benefits-received principle of
taxation?
D. People with high incomes should pay more taxes than people with low incomes.
20–31
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
AACSB: Knowledge Application
A c c e s s i b i l i t y :
Keyboard Navigation
Blooms: Understand
Difficulty:
02 Medium
Learning Objective: 20–06 Summarize the different philosophies regarding the distribution of a
nations tax burden.
Test Bank: I
Topi c :
Apportioning the Tax Burden
65. The federal gasoline tax is assessed on a per-gallon basis, and the proceeds are used for
highway maintenance and improvements. This tax is consistent with the
A. ability–to-pay principle of taxation.
66. The federal income tax is consistent with the principle of taxation, whereas an excise tax on
sporting event tickets is consistent with the principle of taxation.
A. benefits-received; ability-to-pay
67. Using income as the tax base, which of the following best illustrates a regressive tax?
A. the federal inheritance tax
68.
I
II
III
IV
V
Tax
Base
(Income)
Tax
Base
(Income)
Tax
Base
(Income)
Tax
Base
(Income)
Tax
Base
(Income)
$30
$100
$10
$100
$5
$100
$30
$100
$10
$100
50
200
20
200
15
200
60
200
30
200
60
300
30
300
30
300
90
300
60
300
70
400
40
400
50
400
120
400
100
400
The table contains five tax schedules for an economy. All figures are in billions of dollars.
Which of the schedules represent(s) a progressive tax?
A. V only
20–33
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
nations tax burden.
Learning Objective: 20–08 Discuss the probable incidence of U.S. taxes and how the
distribution of income between rich and poor is affected by government taxes, transfers, and
spending.
Test Bank: I
Topi c :
Apportioning the Tax Burden
T o p i c :
Probable Incidence of U.S. Taxes
Type: Table
69.
I
II
III
IV
V
Tax
Base
(Income)
Tax
Base
(Income)
Tax
Base
(Income)
Tax
Base
(Income)
Tax
Base
(Income)
$30
$100
$10
$100
$5
$100
$30
$100
$10
$100
50
200
20
200
15
200
60
200
30
200
60
300
30
300
30
300
90
300
60
300
70
400
40
400
50
400
120
400
100
400
The table contains five tax schedules for an economy. All figures are in billions of dollars.
Which of the schedules represent(s) a regressive tax?
A. V only
70.
I
II
III
IV
V
Tax
Base
(Income)
Tax
Base
(Income)
Tax
Base
(Income)
Tax
Base
(Income)
Tax
Base
(Income)
$30
$100
$10
$100
$5
$100
$30
$100
$10
$100
50
200
20
200
15
200
60
200
30
200
60
300
30
300
30
300
90
300
60
300
70
400
40
400
50
400
120
400
100
400
The table contains five tax schedules for an economy. All figures are in billions of dollars.
Which of the schedules represent(s) a proportional tax?
D. I only
71. The sales tax is a regressive tax because the
C. percentage of income paid as taxes is constant as income rises.
D. tax tends to reduce the total volume of consumption expenditures.
20–35
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Learning Objective: 20–08 Discuss the probable incidence of U.S. taxes and how the
distribution of income between rich and poor is affected by government taxes, transfers, and
spending.
Test Bank: I
Topi c :
Apportioning the Tax Burden
T o p i c :
Probable Incidence of U.S. Taxes
72. A tax that takes a larger proportion of income from low-income groups than from high–
income groups is a
A. stabilizing tax.
73. If each taxpayer paid the same lump-sum amount regardless of income level, the tax system
would be
spending.
Test Bank: I
Topi c :
Apportioning the Tax Burden
T o p i c :
Probable Incidence of U.S. Taxes
74.
Which of the lines in the diagram represent(s) a progressive tax?
D. B only
75.
Which of the lines in the diagram represent(s) a proportional tax?
A. both A and B
20–38
76.
Which of the lines in the diagram represent(s) a regressive tax?
A. both A and B
77. Assume you pay a tax of $4,000 on a taxable income of $24,000. If your taxable income
were $30,000, your tax payment would be $5,000. This suggests that the tax is
A. progressive.
20–39
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
B. proportional.
C. regressive.
D. discriminatory.
78. Assume that you pay $10,000 of tax on a taxable income of $50,000. If your taxable income
were $150,000, your tax payment would be $25,000. This suggests the tax is
A. progressive.
79. Which of the following is correct about the U.S. tax system?
A. The primary federal tax system is regressive, while the primary state and local tax systems
are progressive.
20–40
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
C. The primary federal tax system is progressive, while the primary state and local tax systems
are regressive.
D. Both the primary federal tax system and the primary state and local tax systems are
progressive.
80. Overall, the U.S. tax system (combined federal, state, and local) is
A. highly progressive.
81. In 2013, the top 1 percent of all taxpayers in the United States paid what percentage of the
federal income tax?
A. 23.4 percent