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Exam 12: The Design of the Tax System

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Question 1

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Table 12-2 United States Income Tax Rates for a Single Individual, 2002 and 2003. -Refer to Table 12-2.Costa is a single person whose taxable income is $50,000 a year.What is his total tax due in 2002?

A) $4,057.50
B) $6,426
C) $10,483.50
D) $14,000

E) All of the above
F) None of the above

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Question 2

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One advantage of a lump-sum tax over other taxes is that it

A) is both equitable and efficient.
B) doesn't cause deadweight loss.
C) would place a larger tax burden on the rich.
D) would raise more revenues.

E) B) and D)
F) A) and D)

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Question 3

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A person's tax liability refers to

The government finances the budget deficit by

If all taxpayers pay the same percentage of income in taxes,the tax system is progressive.

Scenario 12-1 Suppose Jim and Joan receive great satisfaction from their consumption of cheesecake. Joan would be willing to purchase only one slice and would pay up to $6 for it. Jim would be willing to pay $9 for his first slice, $7 for his second slice, and $3 for his third slice. The current market price is $3 per slice. -Refer to Scenario 12-1.Assume that the government places a $4 tax on each slice of cheesecake and that the new equilibrium price is $7.Which of the following statements is correct?

A budget surplus occurs when government receipts fall short of government spending.

Social Security is an income support program,designed primarily to maintain the living standards of the poor.

A person's tax obligation divided by her income is called her

Table 12-2 United States Income Tax Rates for a Single Individual, 2002 and 2003. -Refer to Table 12-2.Costa is a single person whose taxable income is $50,000 a year.What is his marginal tax rate in 2002?

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

An income tax in which the average tax rate is the same for all taxpayers would be considered a

When a tax is justified on the basis that taxpayers receive specific government services,the tax

Antipoverty programs funded by taxes on the wealthy are sometimes advocated on the basis of the benefits principle.

You are trying to design a tax system that will simultaneously achieve both of the following goals: 1) two people with the same total income would pay taxes of the same amount,and 2) a high-income person would pay a higher fraction of income in taxes than a low-income person.Which of the following tax systems could achieve both goals?

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

If revenue from a gasoline tax is used to build and maintain public roads,the gasoline tax may be justified on the basis of

Corporate profits are

In 2004,social insurance taxes represented what percentage of total receipts for the federal government?

The tax that generates the most revenue for state and local government is the