Exam 18: Taxation- How It Works and What It Means

Suppose there are two people in a society that has a 50% income tax.Both people have pretax incomes of $40,000.In period 1,there was no tax deduction; Lillian gave $6,000 to charity,and Susie gave $4,000 to charity.In period 2,the government makes charitable donations tax deductible,and Lillian gives $8,000 to charity.What is the amount Susie must give in period 2 so that the marginal impact of the tax break is exactly twice the inframarginal impact of the tax break?

A tax system in which average tax rates fall as income rises is a ________ tax system; the way in which the average tax rate changes as income rises is a measure of ________ equity.

What is the difference between the marginal tax rate and the average tax rate? What is the difference between the statutory tax rate and the effective tax rate? Explain.

Approximately what proportion of U.S.federal tax revenues comes from corporate taxes?

Which is considered to be a tax on wealth?

By which item can taxpayers reduce the taxes they owe to the government through spending,for example,on child care?

Which tax is paid by sellers (producers or merchants)on the sales of particular goods,such as cigarettes or gasoline?

Which tax is based on the value of the estate left behind when a person dies?

The most cost-efficient tax breaks have large ________ impacts and small ________ impacts.

The existence of a marriage tax means that the:

Which tax is paid on the value of assets (e.g.,stocks)held by a person or family?

Suppose there are two people in a society.The federal tax law states that the first $20,000 of income is taxed at 10% and income above that is taxed at 30%.The federal government allows taxes paid to local governments to be deducted.George earns a gross income of $40,000,and Jorge earns a gross income of $65,000.Out of his income,George pays $1,000 in local taxes; out of his income,Jorge pays $20,000 in local taxes.Which of the following statements is TRUE?

Suppose two people live in a society that has a 25% income tax.Both people have pretax income of $40,000.In period 1,there was no tax deduction; Lillian gave $6,000 to charity; and Susie gave $4,000 to charity.In period 2,the government makes charitable donations tax deductible,and Lillian gives $8,000.What is the amount Susie must give in period 2 so that the marginal impact of the tax break is equal to the inframarginal impact of the tax break?

Which of the following CANNOT be subtracted from gross income as a deduction?

Which of the following is a fundamental distinguishing feature of individual income taxes compared with payroll taxes?

The alternative minimum tax (AMT):

Three goals are all considered worthwhile for income tax design,but they cannot be achieved simultaneously.Which of the following is NOT one of those goals?

There is a 20% tax on the first $15,000 of income,a 30% tax on income above $15,000 until $30,000,and a 40% tax on all income above $30,000.What is the marginal tax rate for someone making $35,000?

Which consideration best characterizes the justification for deducting some or all of the cost of business lunches as a deviation from the Haig-Simons comprehensive income definition?

Which item was the largest tax expenditure of the federal government in 2014?