Exam 12: The Design of the Tax System

Scenario 12-3 A taxpayer faces the following tax rates on her income: ​ 20 percent of the first $\$ 40,000$ of her income; 30 percent of all her income above $\$ 40,000$ . -Refer to Scenario 12-3. At what level of income would the taxpayer's marginal tax rate be 30 percent and her average tax rate be 25 percent?

A tax system based on the ability-to-pay principle claims that all citizens should

What are the characteristic(s) of an efficient tax system?

Which tax system requires all taxpayers to pay the same percentage of their income in taxes?

What has been the relationship over the past century between the U.S. economy's income and the percentage of that income that the government collects in revenues?

Table 12-9 Income Amount of Tax \ 50,000 \ 5,000 \ 60,000 \ 5,500 \ 70,000 \ 6,000 -Refer to Table 12-9. Does the tax system achieve vertical equity?

What are the two main sources of tax revenues for state and local governments?

Table 12-10 -Refer to Table 12-10. Do any of the plans achieve vertical equity?

An efficient tax system is one that imposes small

In 2017, which category represented the largest source of receipts for the U.S. federal government?

In 2014, the largest source of receipts for state and local governments was corporate income taxes.

Scenario 12-2 Suppose Regina and Ben receive great satisfaction from their consumption of cheesecake. Regina would be willing to purchase only one slice and would pay up to $13 for it. Ben would be willing to pay $17 for his first slice, $14 for his second slice, and $10 for his third slice. The current market price is $10 per slice. -Refer to Scenario 12-2. Assume that the government places a $4 tax on each slice of cheesecake and that the new equilibrium price is $14. Which of the following statements is correct?

As a person's or family's income rises, the marginal federal income tax rate __________.

If tax revenues from a cigarette tax are used to pay for healthcare expenses related to lung cancer, the cigarette tax could be justified using the __________.

By law, all states must have a state income tax.

Vertical equity refers to a tax system in which individuals with similar incomes pay similar taxes.

Time spent filling out tax forms, time spent keeping tax records, and government resources spent to enforce tax laws are examples of the __________ of the U.S. income tax system.

European countries tend to rely on which type of tax more so than the United States does?

Scenario 12-2 Suppose Regina and Ben receive great satisfaction from their consumption of cheesecake. Regina would be willing to purchase only one slice and would pay up to $13 for it. Ben would be willing to pay $17 for his first slice, $14 for his second slice, and $10 for his third slice. The current market price is $10 per slice. -Refer to Scenario 12-2. Assume that the government places a $4 tax on each slice of cheesecake and that the new equilibrium price is $14. What is Regina's consumer surplus from cheesecake?

Economics alone cannot determine the best way to balance the goals of efficiency and equity.