Understanding Taxes and Government Budget

What is the primary source of revenue for the government?

• Donations

• Taxes

• Loans

• Fines

Answer explanation

The primary source of revenue for the government is taxes. Taxes are collected from individuals and businesses, providing essential funding for public services and infrastructure, unlike donations, loans, or fines.

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DOK Level 1: Recall

Which government agency is responsible for collecting income tax in the United States?

• Federal Bureau of Investigation (FBI)

• Internal Revenue Service (IRS)

• Central Intelligence Agency (CIA)

• Department of Defense (DoD)

Answer explanation

The Internal Revenue Service (IRS) is the U.S. government agency responsible for collecting income tax. The other agencies listed, such as the FBI, CIA, and DoD, have different functions unrelated to tax collection.

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DOK Level 1: Recall

What type of tax is typically levied on the sale of goods and services?

• Property tax

• Income tax

• Sales tax

• Estate tax

Answer explanation

Sales tax is a tax imposed on the sale of goods and services, making it the correct answer. Property tax is on real estate, income tax is on earnings, and estate tax is on inherited assets.

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DOK Level 1: Recall

Which of the following is a tax on the value of a property?

• Sales tax

• Income tax

• Property tax

• Excise tax

Answer explanation

Property tax is specifically a tax levied on the value of real estate properties, making it the correct choice. Sales tax applies to goods, income tax to earnings, and excise tax to specific goods or activities.

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DOK Level 1: Recall

How does the government use the revenue collected from taxes?

• To fund public services and infrastructure

• To give back to taxpayers directly

• To invest in private companies

• To save for future use

Answer explanation

The government primarily uses tax revenue to fund public services and infrastructure, such as education, healthcare, and transportation, ensuring the well-being and development of society.

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DOK Level 2: Skill/Concept

Which of the following best describes the term "budget" in the context of government finance?

• A plan for how to spend money

• A list of all government employees

• A record of past expenses

• A collection of tax laws

Answer explanation

In government finance, a "budget" is best described as a plan for how to spend money. It outlines expected revenues and expenditures, guiding financial decisions and resource allocation.

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DOK Level 2: Skill/Concept

Why is it important for citizens to pay taxes?

• To avoid penalties

• To support government functions and services

• To increase their personal wealth

• To reduce government debt

Answer explanation

Paying taxes is crucial as it funds government functions and services, such as education, healthcare, and infrastructure, which benefit all citizens. While avoiding penalties and reducing debt are important, the primary purpose is to support these essential services.

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DOK Level 2: Skill/Concept

Which of the following is an example of a direct tax?

• Sales tax

• Income tax

• Excise tax

• Value-added tax (VAT)

Answer explanation

Income tax is a direct tax because it is levied directly on individuals' earnings. In contrast, sales tax, excise tax, and VAT are indirect taxes, as they are applied to goods and services rather than directly on income.

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DOK Level 1: Recall

What is the role of the Internal Revenue Service (IRS)?

• To create tax laws

• To collect and enforce tax laws

• To provide loans to businesses

• To manage government spending

Answer explanation

The IRS is responsible for collecting and enforcing tax laws, ensuring compliance and proper revenue collection for the government. It does not create tax laws, provide loans, or manage government spending.

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DOK Level 2: Skill/Concept

Which of the following is NOT a type of tax?

• Income tax

• Property tax

• Sales tax

• Service fee

Answer explanation

A service fee is a charge for a service provided, not a tax. In contrast, income tax, property tax, and sales tax are all government-imposed taxes on income, property, and sales transactions, respectively.

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DOK Level 1: Recall