Homework: Chapter 6 Homework – Flashcards
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The main source of government funding is
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taxes (second source)
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A proportional tax, or flat-rate tax
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takes the same percentage of a person's taxable income in tax regardless of their level of income. (Under a proportional or flat-rate system of taxation, taxpayers at all income levels end up paying the same percentage of their income in taxes.)
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Which of the following explains the difference between the average tax rate and the marginal tax rate?
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The average tax rate uses total income while the marginal tax rate refers to the tax rate of the last dollar earned. (The average tax rate is the total tax payment divided by total income while the marginal tax rate refers to the tax rate of the last dollar earned.) (While the average tax rate uses total income, the marginal tax rate does not refer to the tax rate of the first dollar earned.)
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According to the static tax analysis approach to evaluating how changes in tax rates affect government tax collections, (138)
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the tax rate will have no effect on the tax base
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The marginal tax rate shows (132)
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the extra tax due on an extra dollar of income.
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Which of the following is the largest component of federal spending today?
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Social Security
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The marginal income tax rate is equal to
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the change in the tax payment divided by the change in income.
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Excise Tax
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A tax levied on purchases of a particular good or service
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Which of the following is the most important source of revenue for the federal budget?
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The federal personal income tax. (The federal personal income tax accounts for about 43% of all federal revenues and is paid by all American citizens, resident aliens, and most others who earn income in the United States.)
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The corporate income tax in the United States
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results in individuals' being doubly taxed on corporate earnings. (Because individual stockholders must pay taxes on the dividends they receive, which are paid out of after-tax profits by the corporation, corporate profits are taxed twice.)
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A typical capital gain is experienced by
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selling stock or a mutual fund
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A capital gain results when
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An asset is sold for more than it was purchased
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Reduction or elimination of dividend taxes is designed, in part, to
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reduce the double taxation burden on individuals.
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Which of the following is an argument that the incidence of corporate taxation falls entirely on consumers?
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Corporations pass their tax burdens on to consumers by charging higher prices.
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Local government expenditures depend on which taxes?
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Local property, sales, and excise taxes
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The sales tax rate applied to all purchases within a state was 0.04 (4 percent) throughout 2012 but increased to 0.05 (5 percent) during all of 2013. The state government collected all taxes due, but its tax revenues were equal to $40 million each year. ... Within this state, the sales tax base from 2012 to 2013 must have... ...Which of the following could account for this change in the tax base?...
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... declined ... A weaker state economy & People avoiding the purchase of taxable items.
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Which of the following is consistent with dynamic tax analysis?
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An increase in the tax rate will likely cause a decrease in the tax base (When a government raises its sales tax rate, for example, consumers have an incentive to cut back on their purchases of items subjected to the higher rate, perhaps by buying them in a locale where there is a lower sales tax rate or perhaps no tax rate at all.)
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Sales taxes are
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assessed on the prices paid on a large set of goods and services
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Ad valorem taxes
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are assessed as a percentage of a good's price.
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Which of the following statements is TRUE of static tax analysis?
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A government receives higher tax revenues by raising the tax rate
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An excise tax of 60 cents is levied on a product. As a result of the tax, the price of the product goes from $1 to $1.40. Which of the following is true?
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The consumer pays the majority of the tax but not the entire tax (Since consumers pay 40 cents more, and the tax is 60 cents, consumers pay the majority of the tax. )
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Imposing a tax on sales of a product
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shifts the market supply curve for the product.
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For all employee earnings subject to Social Security taxes, what is the current Social Security tax rate for employees?
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6.2%
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The Social Security program is financed directly from
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payroll taxes
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The original impetus for Social Security was
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to provide retirement fund for all persons
