Exam 2: Policy Standards for a Good Tax

The city of Berne recently enacted a 10% tax on the price of a subway ticket. Consequently, Mrs. Lane now walks to work instead of taking the subway. Her behavior illustrates the substitution effect of a tax increase.

If a tax has a progressive rate structure, a taxpayer's average rate is greater than her marginal rate.

Jurisdiction M imposes an individual income tax based on the following schedule. Rate Income bracket 58 \- 0- to \ 50,000 +88 \ 50,001 to \ 200,000 +128 \ 200,001 and above Which type of rate structure does this tax use?

Assume that Congress plans to amend the federal income tax to provide a deduction for the first $2,400 of residential rent paid by families with incomes below the federal poverty level. Which of the following statements is true?

A dynamic forecast of the revenue effect of a tax rate change assumes that the tax base does not change.

The sales tax laws of many states exempt the purchase of groceries and prescription drugs from tax. Such exemptions are intended to improve the:

Which of the following statements does not describe the Keynesian standard of tax efficiency?

Which of the following taxes is most convenient for individuals (purchasers) to pay?

Individuals who believe that a tax system is fair are less likely to cheat on their taxes than individuals who believe that the system is unfair.

The federal government is not required to pay interest on the national debt.

Which of the following statements about tax rate structures is true?

A tax should result in either horizontal or vertical equity across taxpayers.

Jurisdiction P recently increased its income tax rate. A taxpayer who reacts to the increase by working harder to earn more income is demonstrating the income effect of the rate increase.

Which of the following statements about a proportionate income tax rate structure is false?

Which of the following statements about the substitution effect of an income tax rate increase is false?

A dynamic forecast of the incremental revenue from a tax rate increase presumes that:

The government of Nation C operated at a $32 billion deficit this year. The deficit suggests that Nation C's tax system is:

If a tax has a proportionate rate structure, a taxpayer's marginal rate and average rate are equal.

The Internal Revenue Service's cost of collecting $100 of tax revenue is about $3.

The statement that "an old tax is a good tax" means that: