Question

_____ 1. According to the benefit principle of taxation:

a. taxes should be distributed according to peoples’ ability to pay.

b. the progressive income tax represents the ideal way of distributing taxes among a nation’s citizens.

c. user charges are an ideal source of finance for government-produced goods and services.

d. flat-rate taxes are the only fair type, since all citizens benefit equally from provision of public goods.

_____ 2. If horizontal equity is achieved in taxation:

a. individuals of economic capacity will pay equal taxes.

b. vertical equity will also be achieved.

c. a flat-tax will be used.

d. the tax system will not result in losses of efficiency in markets.

_____ 3. The tax base of a payroll tax is:

a. consumer expenditures.

b. labor income.

c. interest income.

d. a combination of expenditures, labor income, and interest income.

_____ 4. What is the primary reason the United States manages to collect a high percentage of income tax assessed on its wage-earning citizens?

a. The IRS audits a large percentage of tax returns and almost always catches those who attempt to evade taxes.

b. Penalties for tax evasion are so severe that citizens don't attempt to cheat the IRS.

c. The income tax withholding system requires employers to withhold taxes from wages and remit those payments to the government.

d. The United States actually does not manage to collect a high percentage of income tax assessed on wage earners.

_____ 5. Which of the following is not necessarily an impact of persistent budget deficits?

a. The tax burden is shifted from current to future taxpayers.

b. Governments can accomplish current projects that have large social benefits, without raising taxes.

c. The portion of the budget allocated for interest payments increases as a fraction of total spending.

d. The absolute amount of government debt is increased.

_____ 6. Firms are permitted to transfer patents and trademarks to subsidiaries in other countries without charging them for the intellectual property (IP). What is the most important impact of this practice from a financial standpoint?

a. Firms can reduce their US tax liability by transferring profits from high tax countries to low tax countries,

b. Firms can reduce their US tax liability by transferring profits from low tax countries to high tax countries.

c. Firms can reduce their US tax liability by transferring patents from low tax countries to high tax countries.

d. Firms cannot benefit financially from moving IP from country to country.

_____ 7. The incidence, or true burden of a tax:

a. is not dependent of the economic actor upon which the tax is imposed.

b. falls most heavily on the buyer if price elasticity of demand is higher than price elasticity of supply.

c. falls most heavily on the seller if price elasticity of demand is zero.

d. is paid entirely by the seller if supply elasticity is infinite.

_____ 8. If government officials were most concerned about protecting consumers from higher prices, they would favor imposing taxes on goods:

a. that are necessities.

b. that are luxuries.

c. for which the tax is likely to be forward shifted.

d. for which the tax cannot be backward shifted.

_____ 9. Which of the following is NOT true of the omnibus appropriation bill passed by Congress on March 23rd?

a. It provides funding for all government agencies up to September 30, 2018.

b. It includes the “Cloud Act,” a provision allowing federal law enforcement to demand user data from tech companies regardless of where they store it.

c. The text of the bill was shared with Representatives and Senators on the first of March, to give them time to read and understand all 2000+ pages.

d. It includes a special payment of $174,000 to be given to the heir of Louise Slaughter, a Representative from New York who recently passed away.

_____ 10. If government were to levy taxes only on goods and services supplied by monopolies, what would be the impact on excess burden across the economy?

a. Excess burden would increase, as monopolies extracted more consumer surplus.

b. Excess burden would be reduced, as monopoly excess burden is inherently lower.

c. Excess burden would increase, since monopoly quantities are chosen along the MR curve, while competitive quantities are set along the demand curve.

d. There would be no change in excess burden.

Answer 1

1. (b) Because under the benefit taxation , taxes are seen aa serving a function where everyone should contribute towards it and its is received through publuc finance.

2.(a) Because horizontal equity is an economic theory that states that individual earning similar amount of money do not wind up paying the same taxes. However it can be difficult to achieve.

3 (d) Reason is that the payroll tax is a broad concept. Its basically the tax levied on the value of certain salaries or supplement payments made between the employer and the employees.

4. a The United States collect taxes from high earning group.

The over system of taxation in US is progressive , tge effective tax rates tends to increase if the income increases.