Tax and Taxation

Which of these questions measures the efficiency of a tax system?

• How much of the tax gets into the public treasury?

• How simple is the tax code to understand and obey?

• How fairly are the taxes distributed between rich and poor?

• How well does the system fund the expenses of government?

Which of these sources of government revenue best illustrates the benefits-received approach to tax equity?

• A corporation pays taxes on its income.

• A driver deposits coins in a parking meter.

• Funds for Medicare are withheld from a paycheck.

• A percentage of a large inheritance is paid to the government.

When a tax becomes a disincentive to work, the resulting reduction in productivity is a form of

• deadweight loss.

• entitlement.

• marginal tax rate.

• tax incidence.

To calculate the amount of tax due, multiply the tax base by the tax

• assessment.

• rate.

• referendum.

• return.

Most sales taxes are regressive because

• taxable purchases are capped at $50,000 a year.

• wealthier people pay less tax on a purchase than poorer people would pay on the same item.

• most people cannot afford to buy such luxury goods as yachts, furs, and diamonds

• poorer taxpayers spend a larger proportion of their income on taxable goods and services than do wealthier taxpayers.

Which of these taxes is the leading source of revenue for the federal government?

• corporate income taxes

• individual income taxes

• inheritance taxes

• payroll taxes

The Internal Revenue Service routinely collects taxes from employees through a system of

• assessments.

• audits

• entitlement.

• withholding.

Which of these is a progressive tax?

• excise tax

• luxury tax

• property tax

• Social Security tax

When federal expenditures exceed federal tax revenues, how does the government fund the deficit?

• by printing additional paper money

• by asking not-for-profit corporations for help

• by taking a loan from the Federal Reserve Bank

• by borrowing money through the sales of bonds

How do state and local governments typically generate revenue to pay for education, law enforcement, and fire protection services?

• property and sales taxes

• payroll and insurance taxes

• corporate and business taxes

• lotteries and municipal bonds