Question 1

Tax loopholes are equally available to all taxpayers.

Accepted Answer

A) True 
 B)False

Question 2

The federal income tax began in the United States with the

Accepted Answer

A)  Morrill Act of 1862.
B)  addition of the Bill of Rights to the Constitution in 1791.
C)  passage of the 16th Amendment to the Constitution in 1913.
D)  New Deal legislation of the 1930s.E) B) and D)
F) B) and C)

Question 3

The ____ is the fraction of each additional dollar of income that is paid in taxes.

Accepted Answer

A)  deferred tax rate
B)  cumulative tax rate
C)  average tax rate
D)  marginal tax rateE) A) and C)
F) A) and B)

Question 4

A tax loophole is

Accepted Answer

A)  an illegal method by which individuals or corporations avoid paying the taxes they legally owe.
B)  a provision in the tax code that allows individuals or corporations to reduce their tax burdens legally by meeting certain conditions.
C)  a tax surcharge on incomes within certain ranges.
D)  a provision in the tax code that allows individuals or corporations to shift the economic incidence of a particular tax on to someone else.E) A) and B)
F) A) and D)

Question 5

If a tax is proportional,the average tax rate

Accepted Answer

A)  remains the same as income rises.
B)  rises as income rises.
C)  falls as income rises.
D)  falls as income falls.E) A) and B)
F) None of the above

Question 6

Employers can shift payroll taxes by substituting capital for labor.

Accepted Answer

A) True 
 B)False

Question 7

The payroll tax is a

Accepted Answer

A)  progressive tax.
B)  neutral tax.
C)  regressive tax.
D)  proportional tax.E) All of the above
F) C) and D)

Question 8

The benefits principle is often used to justify

Accepted Answer

A)  the progressive income tax.
B)  a flat income tax.
C)  a regressive excise tax.
D)  earmarking the proceeds from taxes for specific public services.E) None of the above
F) B) and C)

Question 9

If demand is more elastic,the portion of an excise tax borne by a buyer will

Accepted Answer

A)  increase.
B)  decrease.
C)  be unchanged.
D)  increase for normal goods, decrease for inferior goods.E) None of the above
F) B) and C)

Question 10

Which of the following government entities relies most heavily on sales taxes?

Accepted Answer

A)  local government
B)  state government
C)  federal government
D)  the Social Security AdministrationE) C) and D)
F) B) and C)

Question 11

A tax system under which an individual pays a higher fraction of his income in taxes at higher levels of income is formally described as

Accepted Answer

A)  digressive.
B)  progressive.
C)  proportional.
D)  regressive.E) None of the above
F) A) and B)

Question 12

No tax can lead the economy to higher levels of efficiency.

Accepted Answer

A) True 
 B)False

Question 13

The corporate income tax is

Accepted Answer

A)  an indirect tax.
B)  a regressive tax.
C)  the second largest source of revenue for the federal government.
D)  a direct tax.E) B) and C)
F) A) and C)

Question 14

Direct taxes are levied directly on people or corporations.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following best reflects the ability-to-pay philosophy of taxation?

Accepted Answer

A)  an excise tax on coffee
B)  an excise tax on gasoline
C)  a progressive income tax
D)  a tax on residential propertyE) A) and B)
F) All of the above

Question 16

The corporate income tax is

Accepted Answer

A)  a tax on corporate profit, not revenue.
B)  the single largest source of federal revenue.
C)  a payroll tax paid partially by employees and partially by employers.
D)  has increased as a proportion of federal tax revenue since 1950.E) A) and D)
F) B) and D)

Question 17

The total burden of a tax equals tax receipts plus excess burden.

Accepted Answer

A) True 
 B)False

Question 18

Examples of indirect taxes are

Accepted Answer

A)  income taxes levied by some states.
B)  sales taxes and property taxes.
C)  poll taxes.
D)  corporate profits taxes.E) B) and D)
F) C) and D)

Question 19

Which of the following is a direct tax?

Accepted Answer

A)  excise tax
B)  tax on corporate profits
C)  property tax
D)  sales taxE) All of the above
F) A) and D)

Question 20

Tax loopholes

Accepted Answer

A)  reduce the progressivity of the federal income tax.
B)  encourage particular patterns of behavior.
C)  include exemption of interest earned on municipal bonds.
D)  All of the above are correct.E) B) and C)
F) A) and D)

Exam 18: Taxation and Resource Allocation

The federal income tax began in the United States with the

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No tax can lead the economy to higher levels of efficiency.

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If demand is more elastic,the portion of an excise tax borne by a buyer will

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A tax loophole is

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If a tax is proportional,the average tax rate

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Which of the following government entities relies most heavily on sales taxes?

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Tax loopholes are equally available to all taxpayers.

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Which of the following is a direct tax?

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The benefits principle is often used to justify

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Direct taxes are levied directly on people or corporations.

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The ____ is the fraction of each additional dollar of income that is paid in taxes.

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Which of the following best reflects the ability-to-pay philosophy of taxation?

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The payroll tax is a

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Tax loopholes

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A tax system under which an individual pays a higher fraction of his income in taxes at higher levels of income is formally described as

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The corporate income tax is

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The corporate income tax is

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Employers can shift payroll taxes by substituting capital for labor.

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The total burden of a tax equals tax receipts plus excess burden.

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Examples of indirect taxes are

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