Question 1

The maximum federal marginal tax rate on taxable personal income is, as of 2016,

Accepted Answer

A)   50 percent.
B)   39.6 percent.
C)   35 percent.
D)   28 percent.E) A) and C)
F) B) and C)

Question 2

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.

Accepted Answer

A)   benefits-received; ability-to-pay
B)   benefits-received; pay-as-you-go
C)   ability-to-pay; benefits-received
D)   ability-to-pay; pay-as-you-goE) None of the above
F) B) and C)

Question 3

127. (Last Word)  In 2012, approximately what percentage of household income was transferred from the top two quintiles to the lowest three quintiles?

Accepted Answer

A)   zero
B)   10
C)   15
D)   22E) A) and D)
F) None of the above

Question 4

If you would have to pay $5,000 in taxes on a $25,000 taxable income and $7,000 on a $30,000 taxable income, then the marginal tax rate on the additional $5,000 of income is

Accepted Answer

A)   40 percent, and the average tax rate is about 23 percent at the $30,000 income level.
B)   50 percent, and the average tax rate is 40 percent at the $30,000 income level.
C)   40 percent, and the average tax rate is 25 percent at the $25,000 income level.
D)   30 percent, but average tax rates cannot be determined from the information given.E) A) and B)
F) A) and C)

Question 5

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

Accepted Answer

A)   ability-to-pay principle of taxation.
B)   benefits-received principle of taxation.
C)   single-tax theory of taxation.
D)   pay-as-you-go theory of taxation.E) C) and D)
F) B) and C)

Question 6

The benefits-received principle of taxation is

Accepted Answer

A)   the basis for the gasoline tax.
B)   easy to apply because benefits received are conveniently measurable.
C)   applied in income-redistribution programs.
D)   the principle behind the income tax system.E) A) and B)
F) A) and C)

Question 7

Using income as the tax base, which of the following best illustrates a regressive tax?

Accepted Answer

A)   the federal inheritance tax
B)   a 7 percent general sales tax
C)   the corporate income tax
D)   the personal income taxE) A) and D)
F) A) and C)

Question 8

The incidence of taxation refers to

Accepted Answer

A)   who in society actually pays a tax.
B)   the structure of basic income tax rates.
C)   whether taxes are progressive or regressive.
D)   whether or not the benefits-received principle applies.E) B) and C)
F) C) and D)

Question 9

The flow of "net taxes" in the circular flow model with a government sector accounts for the following items, except

Accepted Answer

A)   transfer payments such as social security benefits.
B)   subsidies to farmers, airlines, and others.
C)   proprietary income generated by public utilities and state lotteries.
D)   salaries to military personnel, public school teachers, and government inspectors.E) A) and B)
F) C) and D)

Question 10

Property taxes are

Accepted Answer

A)   collected primarily at the federal level.
B)   the largest source of tax revenue for local governments.
C)   the primary source of federal revenue-sharing funds.
D)   used primarily by states to finance state welfare programs.E) B) and D)
F) B) and C)

Question 11

Sales taxes are proportional in relation to income because the same tax rate applies regardless of the size of a purchase.

Accepted Answer

A) True 
 B)False

Question 12

129. (Last Word)  Which of the following statements about taxes and government spending is correct?

Accepted Answer

A)   Despite the overall progressive tax system, government expenditures disproportionately favor the rich and result in a system that is slightly regressive.
B)   The progressive tax system is almost perfectly offset by regressive expenditures, making the overall system proportional.
C)   The regressive tax system is offset by expenditures directed toward lower-income households, making the overall system proportional.
D)   The overall system of taxes and spending is progressive, as over $1 trillion per year gets transferred from upper-income households to lower- and middle-income households.E) B) and D)
F) A) and C)

Question 13

If taxes are $2,000 when income is $15,000 and they are $3,000 when income is $19,000, then the marginal tax rate is

Accepted Answer

A)   20 percent.
B)   25 percent.
C)   30 percent.
D)   40 percent.E) B) and C)
F) All of the above

Question 14

The largest source of local government's revenue is the sales tax.

Accepted Answer

A) True 
 B)False

Question 15

Taxes on commodities or on purchases are known as

Accepted Answer

A)   corporate income taxes.
B)   sales and excise taxes.
C)   personal income taxes.
D)   payroll taxes.E) A) and B)
F) All of the above

Question 16

According to data compiled by the Bureau of Economic Analysis, in 2015, total government spending (comprising purchases and transfers)  in the U.S. was about

Accepted Answer

A)   10 percent of the economy's total output.
B)   33 percent of the economy's total output.
C)   60 percent of the economy's total output.
D)   75 percent of the economy's total output.E) A) and B)
F) B) and C)

Question 17

If government levies a tax or fee on hunting licenses and uses the resulting revenue for wildlife stocking programs, this would be an example of

Accepted Answer

A)   a progressive tax.
B)   a regressive tax.
C)   the ability-to-pay principle of taxation.
D)   the benefits-received principle of taxation.E) A) and B)
F) B) and D)

Question 18

Which of the following is the largest expenditure item of state governments?

Accepted Answer

A)   education
B)   highways
C)   welfare payments
D)   health and hospitalsE) A) and D)
F) None of the above

Question 19

In 2013, the top 1 percent of all taxpayers in the United States paid what percentage of the federal income tax?

Accepted Answer

A)   23.4 percent
B)   37.8 percent
C)   39.6 percent
D)   58.5 percentE) A) and C)
F) B) and D)

Question 20

The federal tax system is

Accepted Answer

A)   proportional, while state and local tax structures are largely progressive.
B)   progressive, while state and local tax structures are largely regressive.
C)   regressive, while state and local tax structures are largely proportional.
D)   regressive, while state and local tax structures are largely progressive.E) B) and C)
F) None of the above

Exam 20: Public Finance: Expenditures and Taxes

According to data compiled by the Bureau of Economic Analysis, in 2015, total government spending (comprising purchases and transfers) in the U.S. was about

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Using income as the tax base, which of the following best illustrates a regressive tax?

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The benefits-received principle of taxation is

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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.

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The flow of "net taxes" in the circular flow model with a government sector accounts for the following items, except

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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

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127. (Last Word) In 2012, approximately what percentage of household income was transferred from the top two quintiles to the lowest three quintiles?

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Sales taxes are proportional in relation to income because the same tax rate applies regardless of the size of a purchase.

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If government levies a tax or fee on hunting licenses and uses the resulting revenue for wildlife stocking programs, this would be an example of

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129. (Last Word) Which of the following statements about taxes and government spending is correct?

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The incidence of taxation refers to

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If taxes are $2,000 when income is $15,000 and they are $3,000 when income is $19,000, then the marginal tax rate is

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The maximum federal marginal tax rate on taxable personal income is, as of 2016,

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The largest source of local government's revenue is the sales tax.

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In 2013, the top 1 percent of all taxpayers in the United States paid what percentage of the federal income tax?

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The federal tax system is

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If you would have to pay $5,000 in taxes on a $25,000 taxable income and $7,000 on a $30,000 taxable income, then the marginal tax rate on the additional $5,000 of income is

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Taxes on commodities or on purchases are known as

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Property taxes are

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Which of the following is the largest expenditure item of state governments?

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