True / False
1. For about the last 45 years, federal taxes have remained relatively constant as a percentage of GDP.
a.
True
b.
False
True
Easy
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
The Level and Types of Taxation
2. For about the last 45 years, state and local taxes have remained relatively constant as a percentage of GDP.
a.
True
b.
False
True
Easy
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
The Level and Types of Taxation
3. The share of GDP taken by taxes has increased dramatically since the 1960s.
a.
True
b.
False
False
Easy
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
The Level and Types of Taxation
4. The share of GDP taken by taxes is considerably higher in the United States than in other countries.
a.
True
b.
False
False
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
5. A progressive tax is one in which the fraction of income paid in taxes rises as a person’s income increases.
a.
True
b.
False
True
Easy
6. A proportional tax is one in which the fraction of income paid in taxes rises as a person’s income increases.
a.
True
b.
False
False
Easy
economics
7. When the average tax rate rises as income rises, this is known as progressive taxation.
a.
True
b.
False
True
Easy
8. A regressive tax is one in which the average tax rate falls as income rises.
a.
True
b.
False
True
Easy
9. The head tax is regressive.
a.
True
b.
False
True
Easy
10. The marginal tax rate has less effect on economic incentives than does the average tax rate.
a.
True
b.
False
False
Moderate
11. Direct taxes are levied on specific economic activities.
a.
True
b.
False
False
Moderate
12. Indirect taxes are levied on specific economic activities.
a.
True
b.
False
True
Moderate
13. Direct taxes are levied directly on people or corporations.
a.
True
b.
False
True
Easy
14. The individual income tax, the inheritance tax, and the head tax are all examples of direct taxes.
a.
True
b.
False
True
Easy
economics
15. Sales taxes, property taxes, and value-added taxes are examples of indirect taxes.
a.
True
b.
False
True
Easy
economics
16. The federal government of the United States relies heavily on value-added taxes.
a.
True
b.
False
False
Easy
17. The federal government receives most of its revenue from three sources: personal income tax, corporate income tax,
and payroll tax.
a.
True
b.
False
True
Moderate
18. Homeowners receive tax benefits that are not available to renters.
a.
True
b.
False
True
Moderate
19. Tax loopholes are equally available to all taxpayers.
a.
True
b.
False
False
Moderate
20. Existing loopholes erode the progressivity of the U.S. tax system.
a.
True
b.
False
True
Moderate
21. Federal tax loopholes in personal income tax provide benefits only to very high-income people.
a.
True
b.
False
False
Moderate
22. When we say most Americans are in the 15-percent tax bracket, we mean federal taxes are about 15 percent of the
income of most Americans.
a.
True
b.
False
False
Difficult
23. Payroll taxes are used to collect revenue for the Social Security program.
a.
True
b.
False
True
Moderate
24. The payroll tax system is a proportional tax for all income earners.
a.
True
b.
False
False
Easy
25. Above a certain income the marginal social security tax drops to zero.
a.
True
b.
False
True
Easy
26. The payroll tax is the federal government’s biggest source of revenue.
a.
True
b.
False
False
Moderate
27. Corporate taxes are a direct tax.
a.
True
b.
False
True
Moderate
28. The corporate tax applies to firms’ total revenues.
a.
True
b.
False
False
Moderate
29. Excise taxes are a form of sales tax.
a.
True
b.
False
True
Easy
30. The Social Security system works exactly like any private retirement trust system.
a.
True
b.
False
False
Moderate
31. Payments to Social Security recipients would decline if the retirement age were lowered.
a.
True
b.
False
False
Moderate
32. One major problem with Social Security is that it is a “pay as you go” system.
a.
True
b.
False
True
Moderate
33. State and local governments receive money from sales taxes, property taxes, and the federal government.
a.
True
b.
False
True
Moderate
34. States rely primarily on income taxes as a source of revenue.
a.
True
b.
False
False
Easy
35. The sales tax is generally considered to be a regressive tax.
a.
True
b.
False
True
Moderate
economics
36. Property taxes are the main source of funding for public schools.
a.
True
b.
False
True
Moderate
37. The system of grants from one level of government to another is an example of fiscal federalism.
a.
True
b.
False
True
Easy
economics
38. The concept of equity pertains to the fairness of a tax.
a.
True
b.
False
True
Easy
39. Horizontal equity means that equally situated individuals should be taxed equally.
a.
True
b.
False
True
Easy
economics
40. Vertical equity in income taxation refers to the notion that persons with different levels of income should be taxed
differently.
a.
True
b.
False
True
Easy
41. Vertical equity refers to the notion that individuals at all levels should be taxed equally.
a.
True
b.
False
False
Moderate
42. Vertical equity refers to the notion that equally situated individuals should be taxed equally.
a.
True
b.
False
False
Moderate
43. The benefits principle states that the users of a service should pay for that service.
a.
True
b.
False
True
Moderate
44. Taxation alters the behavior patterns of individuals.
a.
True
b.
False
True
Moderate
45. The total burden of a tax equals tax collections minus excess burdens.
a.
True
b.
False
False
Moderate
46. The total burden of a tax equals tax receipts plus excess burden.
a.
True
b.
False
True
Moderate
47. An excess burden is present when taxpayers alter their behavior on account of taxation.
a.
True
b.
False
True
Moderate
48. Loopholes reduce the efficiency of the tax system.
a.
True
b.
False
True
Easy
49. Loopholes increase the efficiency of the tax system by making taxpayers better off.
a.
True
b.
False
False
Easy
50. The incidence of a tax explains what group pays the burden of a tax.
a.
True
b.
False
51. The ability to shift a tax burden depends on the relative elasticities of demand and supply for the taxed commodity.
a.
True
b.
False
52. The more inelastic the demand for a product, the larger the share of the tax that will be paid by consumers.
a.
True
b.
False
53. The incidence of a payroll tax is borne by both employers and employees.
a.
True
b.
False
54. Employers can shift payroll taxes by substituting capital for labor.
a.
True
b.
False
55. No tax can lead the economy to higher levels of efficiency.
a.
True
b.
False
False
Difficult
56. A tax that reduces economic efficiency is always bad policy.
a.
True
b.
False
False
Moderate
57. Taxation can promote good social policy while minimizing economic inefficiency.
a.
True
b.
False
True
Moderate
58. From the passage of the 16th amendment to the U.S. Constitution, income taxes became the primary source of income
for the U.S.
a.
True
b.
False
False
Moderate
economics
59. Payroll tax is a proportional tax.
a.
True
b.
False
False
Difficult
60. Pay as you go financing for the Social Security System was abandoned in 1983.
a.
True
b.
False
True
Moderate
United States – BPROG: Analytic
Monetary and fiscal policy
The Federal Tax System
Multiple Choice
61. One major tax loophole intended to help state & local governments raise funds is:
a.
fiscal federalism
b.
tax exempt municipal bond interest
c.
tax deductible mortgage interest
d.
tax credits for solar panels
Moderate
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
The Level and Types of Taxation
62. The share of GDP going to federal taxes
a.
has been about 16 to 20 percent for the past 40 years.
b.
has been about 35 percent for the past 40 years.
c.
was about 40 percent until the early 1980s and has dropped greatly since then.
d.
has risen steadily in the past 40 years to about 35 percent.
a
Moderate
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
The Level and Types of Taxation
63. The shares of GDP taken in taxes by federal, state & local governments
a.
have risen steadily in the past 40 years to about 22 percent.
b.
have dropped steadily in the past 40 years to about 6 or 7 percent.
c.
grew substantially until the early 1970s and have leveled off at about 10 to 11 percent.
d.
fell steadily until the early 1970s and has risen steadily since then.
c
Moderate
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
The Level and Types of Taxation
64. Americans generally pay
a.
a lower percentage of their incomes in taxes than citizens of other industrialized countries.
b.
a lower percentage of their incomes in taxes than citizens of other industrialized countries, with the exceptions
of Sweden and the Netherlands.
c.
about the same percentage of their incomes in taxes as citizens of other industrialized countries.
d.
a higher percentage of their incomes in taxes than citizens of other industrialized countries.
a
Easy
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
The Level and Types of Taxation
65. Since World War II, the share of corporate income tax collections in total federal revenue has been:
a.
increasing rapidly.
b.
declining rapidly.
c.
increasing slowly.
d.
declining generally.
Moderate
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
The Level and Types of Taxation
66. A tax system under which an individual pays a higher fraction of his income in taxes at higher levels of income is
formally described as
a.
digressive.
b.
progressive.
c.
proportional.
d.
regressive.
United States – BPROG: Analytic
The study of economics, and defi – The study of economics, and definitions of economics
67. A progressive income tax system can be defined as one in which
a.
the government uses taxes paid by the wealthy to fund programs for the poor.
b.
an individual pays more dollars in taxes when his income rises.
c.
the marginal tax rate rises over time.
d.
the average tax rate is higher for individuals with higher incomes.
United States – BPROG: Analytic
The study of economics, and defi – The study of economics, and definitions of economics
The Level and Types of Taxation
68. Under a progressive tax, the fraction of income paid in taxes
a.
rises as income rises.
b.
is unchanged as income changes.
c.
falls as income rises.
d.
is proportional to the change in income.
United States – BPROG: Analytic
The study of economics, and defi – The study of economics, and definitions of economics
69. Under a proportional tax, the fraction of income paid in taxes
a.
rises as income rises.
b.
is unchanged as income changes.
c.
falls as income rises.
d.
is proportional to the change in income.
United States – BPROG: Analytic
The study of economics, and defi – The study of economics, and definitions of economics
The Level and Types of Taxation
70. In Country X, the government requires employers to collect 9 percent of every employee’s compensation as payroll
tax. This is an example of
a.
progressive tax.
b.
regressive tax.
c.
digressive tax.
d.
proportional tax.
United States – BPROG: Analytic
The study of economics, and defi – The study of economics, and definitions of economics
The Level and Types of Taxation
71. Under a regressive tax, the fraction of income paid in taxes
a.
rises as income rises.
b.
is unchanged as income changes.
c.
falls as income rises.
d.
is proportional to the change in income.
United States – BPROG: Analytic
The study of economics, and defi – The study of economics, and definitions of economics
The Level and Types of Taxation
72. A progressive tax is one for which the percentage of each added dollar of income paid in taxes
a.
increases as income increases.
b.
remains the same as income increases.
c.
decreases as income increases.
d.
is zero after a certain maximum income is reached.