Deck 18: Taxation and Public Expenditure

Question 1

A demogrant is

A) a social benefit that is paid to individuals depending on their income.
B) a social benefit that is paid to individuals according to their demographic group (race, age or income group, for example).
C) a federal transfer to provincial governments that is adjusted annually based on demographic shifts in the province.
D) a social benefit that is paid to individuals, regardless of their income.
E) a federal transfer to individuals that is administered through the tax system.

Answer 1

D

Question 2

The diagram below shows supply and demand diagrams (S and D) for some product. The government then imposes an excise tax. The new supply curve is ST. FIGURE 18- 4
Refer to Figure 18- 4. What is the dollar value of the excess burden of this tax?

A) $2
B) $10
C) $40
D) $1
E) $5

Answer 2

B

Question 3

From the perspective of individuals, the goods and services tax (GST) applies to

A) profits for self- employed individuals.
B) total taxable income.
C) expenditure rather than income.
D) additional income earned.
E) saving rather than expenditure.

Answer 3

C

Question 4

If a tax system contains some important taxes that are regressive, substantial progressivity in other taxes would be required in order to achieve

A) efficiency in the overall tax system.
B) equity in the overall tax system.
C) proportionality in the overall tax system.
D) a negative income tax.
E) a flat- rate tax.

Question 5

The figure below shows a simplified version of the current Canadian federal income- tax system. The marginal income- tax rates for the four ranges of income are 15 percent, 22 percent, 26 percent, and 29 percent, respectively. FIGURE 18- 2
Refer to Figure 18- 2. What needs to be true about the four marginal income- tax rates in order for this tax system to be considered regressive?

A) they need to decrease as income increases
B) they need to be larger than they are now
C) they need to increase as income increases
D) they need to be constant
E) they need to be smaller than they are now

Question 6

The diagram below shows supply and demand diagrams (S and D) for some product. The government then imposes an excise tax. The new supply curve is ST. FIGURE 18- 4
Refer to Figure 18- 4. What is the producers' net revenue after the imposition of the tax?

A) $630
B) $450
C) $540
D) $600
E) $500

Question 7

The table below shows 2009 federal income- tax rates in Canada. $\begin{array}{|l|l|}\hline \text { Taxable Income } & \text { Mar ginal Tax Rate } \\\hline \$ 0-\$ 40726 & 15 \text { percent } \\\hline \$ 40727-\$ 81452 & 22 \text { percent } \\\hline \$ 81453-\$ 126264 & 26 \text { percent } \\\hline \$ 126265 \text { and over } & 29 \text { percent } \\\hline\end{array}$
$\text { TABLE 18- } 1$

-Refer to Table 18- 1. If an individual had a taxable income of $120 000, how much federal tax would be due from the earnings taxed at the minimum rate of 15 percent?

A) $0
B) $6109
C) $8003
D) $18 000
E) $34 800

Question 8

The diagram below shows supply and demand diagrams (S and D) for some product. The government then imposes an excise tax. The new supply curve is ST. FIGURE 18- 4
Refer to Figure 18- 4. What is the producers' revenue before the imposition of the tax?

A) $540
B) $600
C) $500
D) $630
E) $450

Question 9

Suppose a Canadian Member of Parliament suggests that people with the ability to pay higher taxes should do so. This refers to the concept of

A) the benefit principle.
B) equality of outcomes.
C) proportionality.
D) horizontal equity.
E) vertical equity.

Question 10

Consider an income- tax system that requires all individuals to pay exactly 3 percent of their income. This income- tax system is

A) a lump- sum system, sometimes called a poll tax.
B) proportional.
C) regressive, since 3 percent is harder to pay for a low- income taxpayer.
D) fair, since everyone pays the same amount.
E) progressive, because the higher the individual's income, the greater the amount of tax paid.

Question 11

Consider a 10- percent excise tax that is similarly applied to good X, which has a price elasticity of 2.7, and to good Y, that has a price elasticity of 0.6. We can predict that the excess burden of this tax in the market for good X will be the excess burden in the market for good Y.

A) no larger than
B) 2.1 times the size of
C) smaller than
D) equal to
E) larger than

Question 12

The goods and services tax (GST) in Canada is an example of a(n)

A) invisible tax.
B) excise tax.
C) progressive tax.
D) proportional tax.
E) value- added tax.

Question 13

In 2009, the federal income- tax rate was graduated in _ steps, with the top rate applying to incomes above approximately .

A) four; $126 000
B) eight; $40 000
C) eight; $120 000
D) three; $100 000
E) three; $81 000

Question 14

One efficiency- based argument against government subsidies for post- secondary education is that

A) relative to the federal contribution, the provincial contribution to higher education is too high.
B) few positive externalities are involved in the consumption of education.
C) they would encourage people not to seek employment.
D) most benefits from education accrue to society as a whole.
E) the subsidy is essentially a transfer from lower- income, non- university- trained taxpayers to potentially higher- income- earning university students.

Question 15

In Canada, taxes are levied and collected by

A) all levels of government.
B) the federal government only.
C) the provincial governments only.
D) federal and provincial governments only.
E) local governments only.

Question 16

When assessing a tax system, "vertical equity" refers to

A) equity within a given income group.
B) unequal treatment of persons with unequal incomes.
C) equity between corporate entities.
D) equity across different periods of time.
E) equity across income groups.

Question 17

In Canada, students' tuition fees for post- secondary education account for about

A) 12 percent of total costs.
B) 16 percent of total costs.
C) 20 percent of total costs.
D) 50 percent of total costs.
E) 54 percent of total costs.

Question 18

Possible implications of corporate income taxes being levied on accounting profits include
1) underinvestment in new machinery and equipment;
2) a lower rate of adoption of the latest technologies;
3) faster productivity growth.

A) 3 only
B) 1 and 2
C) 1 only
D) 2 only
E) 1 and 3

Question 19

Registered Retirement Savings Plans (RRSPs) operate whereby

A) the federal and provincial governments allow income- tax deductions for contributions made to special retirement funds.
B) any unemployed worker is paid while searching for employment.
C) the federal government transfers funds to provincial governments.
D) eligible unemployed workers are paid while searching for new employment.
E) Canadians contribute during their working years and then receive payments when they are retired.

Question 20

If all university students had to pay the full cost of their education,

A) horizontal equity would be worsened because university students in general come from the lowest- income families.
B) they would probably choose less education than what is socially optimal.
C) vertical equity would be enhanced, since university students would internalize the externalities of their educations.
D) the economic efficiency of the higher education system would be greatly enhanced.
E) the federal debt could be eliminated.

Question 21

Suppose taxes are levied in the following way. All individuals pay a tax equal to $2000 no matter what income they earn. In addition, all individuals pay 20 percent of all their earned income in taxes. This income- tax system is

A) regressive.
B) an accurate description of the Canadian system.
C) proportional.
D) indexed.
E) progressive.

Question 22

FIGURE 18- 1
Refer to Figure 18- 1. A proportional tax is illustrated by curve(s)

A) A and B.
B) B and C.
C) C and D.
D) B only.
E) D only.

Question 23

FIGURE 18- 3
Refer to Figure 18- 3. Suppose that supply is perfectly elastic and the price of this good is initially
P3. If an excise tax raises the price from P3 to P4, the excess burden of the tax is

A) the area BFC.
B) the area P2BP3.
C) the area P3AP4.
D) zero.
E) the area P1CP4.

Question 24

The figure below shows a simplified version of the current Canadian federal income- tax system. The marginal income- tax rates for the four ranges of income are 15 percent, 22 percent, 26 percent, and 29 percent, respectively. FIGURE 18- 2
Refer to Figure 18- 2. This income- tax system can be characterized as

A) proportional.
B) cumbersome.
C) progressive.
D) fair.
E) regressive.

Question 25

As a proportion of Gross Domestic Product (GDP), Canadian governments' tax revenues, as compared to other industrialized countries, are

A) among the lowest.
B) roughly in the middle of the group.
C) the very highest.
D) among the highest.
E) the very lowest.

Question 26

The Canada Health Transfer (CHT) and the Canada Social Transfer (CST) refer to transfer payments made by the federal government to

A) municipal governments.
B) the Medicare program.
C) individuals.
D) specific social programs.
E) provincial governments.

Question 27

FIGURE 18- 3
Refer to Figure 18- 3. Suppose that supply is perfectly elastic and the price of this good is initially
P1. If an excise tax raises the price from P1 to P4, the excess burden of the tax is

A) the area P3AP4.
B) the area P1Cq10.
C) the area BFC.
D) the area P1CP4.
E) impossible to calculate from the given information.

Question 28

A tax that takes a higher percentage of income as income rises is called a(n)

A) progressive tax.
B) excise tax.
C) value- added tax.
D) regressive tax.
E) proportional tax.

Question 29

The table below shows 2009 federal income- tax rates in Canada. $\begin{array}{|l|l|}\hline \text { Taxable Income } & \text { Mar ginal Tax Rate } \\\hline \$ 0-\$ 40726 & 15 \text { percent } \\\hline \$ 40727-\$ 81452 & 22 \text { percent } \\\hline \$ 81453-\$ 126264 & 26 \text { percent } \\\hline \$ 126265 \text { and over } & 29 \text { percent } \\\hline\end{array}$
$\text { TABLE 18- } 1$

-Refer to Table 18- 1. If an individual had a taxable income of $120 000, how much federal tax would be due?

A) $6109
B) $8959
C) $10 022
D) $25 091
E) $34 800

Question 30

In Canada, post- secondary eduction is

A) a form of transfer payment.
B) purely a public good.
C) a provincial responsibility not funded by the federal government.
D) a provincial responsibility, funded partially by the federal government.
E) a form of equalization payment across geographic boundaries.

Question 31

Statistics Canada defines the poverty line as the level of income at which a household

A) is in the bottom 10 percent of income groups.
B) adjusted for family size earns less than the average family income in Canada.
C) earns less than $8850 during a calendar year.
D) spends more than 75.5 percent of its income on the three basic necessities of food, shelter, and clothing.
E) spends more than 55 percent of its income on the three basic necessities of food, shelter, and clothing.

Question 32

One of the guiding principles in Canada's system of "fiscal federalism" is that

A) each province is an independent fiscal entity.
B) only provinces that are "federalist" should receive fiscal assistance from the federal government.
C) individuals should have approximately the same access to public services, at broadly comparable tax rates, no matter where they live.
D) the true cost of provision of public goods to the various provinces of Canada should be recovered in tax revenue from the province receiving the benefit.
E) the tax base should be approximately equal in each of the provinces and territories.

Question 33

Because the benefits paid by most universal programs are taxable, their net after- tax yield depends on the income of the recipient. Hence

A) only higher- income households can benefit fully from such programs.
B) gross payments may not be universal, and net benefits are not.
C) gross payments may be universal, but net benefits are not.
D) gross payments may not be universal, but net benefits are.
E) gross payments and net benefits are universal.

Question 34

If one was concerned only with satisfying the "benefit principle", the ideal tax would be a(n)

A) income tax.
B) proportional income tax.
C) surcharge tax.
D) user charge.
E) sales tax.

Question 35

A Laffer curve

A) relates the marginal tax rate to the average tax rate.
B) shows that, for any tax, tax revenues reach a maximum at some tax rate below 100 percent.
C) relates the government's sales- tax yield to the marginal tax rate.
D) relates the government's income- tax yield to the average rate across all taxes.
E) shows that tax revenues reach a maximum when the marginal tax rate is zero.

Question 36

The Canadian federal income tax is progressive because it has

A) average rates that rise but marginal rates that are constant at most levels of income.
B) marginal and average rates that rise and are equal at most levels of income.
C) marginal rates that are lower than average rates at most levels of income.
D) average and marginal rates that are constant at most levels of income.
E) marginal rates that are higher than average rates at most levels of income.

Question 37

FIGURE 18- 3
Refer to Figure 18- 3. Suppose that supply is perfectly elastic and the price of this good is initially
P1. If an excise tax raises the price from P1 to P2, the excess burden of the tax is area

A) P2BP3.
B) P1CBP2.
C) P1FBP2.
D) BFC.
E) P3AP4.

Question 38

The tax that generates the greatest proportion of government revenue in Canada is

A) the goods and services tax.
B) the property tax.
C) the payroll tax.
D) the provincial sales tax.
E) the income tax.

Question 39

Suppose a Canadian Member of Parliament suggests that people with the same total income should pay the same taxes, no matter the source of their income. This refers to the concept of

A) vertical equity.
B) the benefit principle.
C) proportionality.
D) horizontal equity.
E) equality of outcomes.

Question 40

The excess burden of a tax reflects a reduction of

A) total tax revenues.
B) both equilibrium price and quantity.
C) total economic surplus.
D) economic profits generated in the economy.
E) allocative inefficiency.

Question 41

Which of the following statements about the Canada Health Transfer (CHT) and the Canada Social Transfer (CST) is correct?

A) The CHT and CST are both components of equalization payments from the federal to provincial governments.
B) The federal government makes the CHT and CST annually to the provinces, who in turn make transfers to individuals according to need.
C) The CHT and CST are demogrants that are transferred annually from the federal government to individuals residing in regions of Canada that lack adequate access to health and education programs.
D) The federal government makes the CHT and CST annually to the provinces for spending on health and social programs, but the provinces are free to spend the funds as they wish.
E) The federal government makes the CHT and the CST annually to the provinces, who are legally bound to spend on the funds for their intended purposes.

Question 42

FIGURE 18- 1
Refer to Figure 18- 1. A progressive tax is illustrated by curve(s)

A) A and B.
B) B and C.
C) C and D.
D) A only.
E) C only.

Question 43

The table below shows 2009 federal income- tax rates in Canada. $\begin{array}{|l|l|}\hline \text { Taxable Income } & \text { Mar ginal Tax Rate } \\\hline \$ 0-\$ 40726 & 15 \text { percent } \\\hline \$ 40727-\$ 81452 & 22 \text { percent } \\\hline \$ 81453-\$ 126264 & 26 \text { percent } \\\hline \$ 126265 \text { and over } & 29 \text { percent } \\\hline\end{array}$
$\text { TABLE 18- } 1$

-Refer to Table 18- 1. If an individual had a taxable income of $120 000, how much federal tax would be due from the earnings taxed at the maximum rate of 29 percent?

A) $0
B) $1817
C) $8003
D) $23 621
E) $34 800

Question 44

Which of the following areas of spending account for the largest portion of total Canadian government expenditures?

A) defence spending
B) social services
C) subsidies to Canadian businesses
D) interest payments on public debt
E) equalization payments

Question 45

The sometimes proposed "flat tax", such as one that takes 10 percent of income at all levels of income, is an example of a(n)

A) excise tax.
B) proportional tax.
C) value- added tax.
D) regressive tax.
E) progressive tax.

Question 46

The two main competing goals in the design of a tax system are

A) efficiency and equity.
B) applying the direct and excess burden of taxes evenly.
C) efficiency and productivity.
D) growth and productivity.
E) efficiency and the elimination of distortions.

Question 47

The direct burden of a tax is

A) always regressive.
B) the total revenue collected by the tax.
C) a tax- deductible expense for the person who pays the tax.
D) directly proportional to average income.
E) always progressive.

Question 48

In Canada, publicly provided health care is

A) an externality.
B) funded through equalization payments across geographic boundaries.
C) a form of transfer payment across regions.
D) purely a public good.
E) a provincial responsibility, funded partially by the federal government.

Question 49

The Canada (and Quebec) Pension Plans (CPP and QPP) operate whereby

A) the federal and provincial governments allow income- tax deductions for contributions made to special retirement funds.
B) Canadians contribute during their working years and then receive payments when they are retired.
C) eligible unemployed workers are paid while searching for new employment.
D) the federal government transfers funds to provincial governments.
E) any unemployed worker is paid while searching for employment.

Question 50

Suppose there is only one movie theatre in a town and the equilibrium price and quantity for movie admissions is $9 and 850 visits per week. Now suppose the government imposes a tax such that the new equilibrium price and quantity are $10.50 and 780 visits per week. What is the direct burden of this tax?

A) $1275
B) There is not enough information to know.
C) $0
D) $1170
E) $105

Question 51

Consider two families, each of whom earn total income of $80 000, but that are different in many other respects. If each family is assessed income tax payable of $14 749, then it is very likely that the principle of is being violated.

A) vertical equity
B) proportionality
C) horizontal equity
D) ability to pay
E) progressivity

Question 52

In 2008, public expenditure by all levels of government (federal, provincial, and municipal) combined accounted for approximately what percentage of Canadian GDP?

A) 16
B) 26
C) 36
D) 46
E) 56

Question 53

An example of a regressive tax in Canada is

A) any one of the provincial sales taxes.
B) the typical property taxes in Canadian cities and towns.
C) the corporate income tax.
D) the federal income tax.
E) the provincial income taxes.

Question 54

The table below shows 2009 federal income- tax rates in Canada. $\begin{array}{|l|l|}\hline \text { Taxable Income } & \text { Mar ginal Tax Rate } \\\hline \$ 0-\$ 40726 & 15 \text { percent } \\\hline \$ 40727-\$ 81452 & 22 \text { percent } \\\hline \$ 81453-\$ 126264 & 26 \text { percent } \\\hline \$ 126265 \text { and over } & 29 \text { percent } \\\hline\end{array}$
$\text { TABLE 18- } 1$

-Refer to Table 18- 1. If an individual had a taxable income of $126 264, how much total federal tax would be due?

A) $497
B) $5639
C) $11 651
D) $22 219
E) $32 829

Question 55

The "benefit principle"

A) is the main principle on which the Canadian tax system is based.
B) requires that users of public goods are taxed in proportion to their ability to pay.
C) is the main principle on which all tax systems are based.
D) requires that users of public goods are taxed in proportion to their use of them.
E) is the main principle on which horizontal equity is based.

Question 56

Suppose a firm buys $3000 worth of inputs from other firms, hires $2000 worth of labour services, and has sales revenue of $7500. The firm's resulting profit is $2500. If the GST (a value- added tax) rate is 5 percent, this firm will pay in GST.

A) $0
B) $125
C) $225
D) $375
E) $2500

Question 57

In Canada, the corporate income tax is integrated with the , so that are not taxed twice on the firm's earnings.

A) income; shareholders
B) sales tax; consumers
C) sales tax; shareholders
D) property tax; corporations
E) personal income tax; corporations

Question 58

FIGURE 18- 3
Refer to Figure 18- 3. Suppose that supply is perfectly elastic and the price of this good is initially
P3. If an excise tax raises the price from P3 to P4, the direct burden of the tax is

A) zero.
B) the area P3AP4.
C) the area BFC.
D) the area P2BP3.
E) the area P1CP4.

Question 59

The Employment Insurance (EI) system operates whereby

A) eligible unemployed workers are paid while searching for new employment.
B) the federal and provincial governments allow income- tax deductions for contributions made to special retirement funds.
C) the federal government transfers funds to provincial governments.
D) any unemployed worker is paid while searching for employment.
E) Canadians contribute during their working years and then receive payments when they are retired.

Question 60

Consider a monopolist that is earning profits in the long run. If the government imposes a lump- sum tax on this monopolist (that is less than its profits), then

A) new firms would enter the industry.
B) the output would remain the same while price increased.
C) output would decrease and price to consumers would increase.
D) the monopolist would cease production.
E) neither output nor price would change.

Question 61

Suppose an income tax is levied in the following way: All individuals pay 10 percent of their income up to an income of $30 000. On all income above $30 000, individuals pay 20 percent of their income. Such a tax is

A) unrealistic.
B) indexed.
C) regressive.
D) proportional.
E) progressive.

Question 62

In Canada, public primary and secondary education

A) are funded by provincial governments, but managed by local school boards.
B) have eliminated illiteracy in Canada.
C) are funded by government as an income redistribution plan.
D) are exclusive federal responsibilities.
E) are purely public goods.

Question 63

The excess burden of a tax

A) increases economic efficiency by eliminating distortions in the economy.
B) is the deadweight loss created by the tax.
C) is the incidence of a tax.
D) is always regressive.
E) is always progressive.

Question 64

The figure below shows a simplified version of the current Canadian federal income- tax system. The marginal income- tax rates for the four ranges of income are 15 percent, 22 percent, 26 percent, and 29 percent, respectively. FIGURE 18- 2
Refer to Figure 18- 2. An individual with a taxable income of $39 500 will pay in income taxes.

A) $6122
B) $0
C) $8690
D) $5925
E) $6109

Question 65

FIGURE 18- 3
Refer to Figure 18- 3. Suppose that supply is perfectly elastic and the price of this good is initially
P1. If an excise tax raises the price from P1 to P2, the direct burden of the tax is

A) the area DEFB.
B) the area P1FBP2.
C) zero.
D) the area BFC.
E) the area P1CBP4.

Question 66

The excess burden of an excise tax

A) reflects the allocative efficiency of the tax.
B) is the price the consumer must pay above the free- market price.
C) is the total cost imposed on the producer by the tax.
D) is the deadweight loss created by the tax.
E) is the administrative cost of collecting the tax.

Question 67

The various provincial sales taxes are mildly regressive because

A) poorer households tend to spend a larger proportion of their incomes than richer households.
B) richer households spend more in total and therefore pay more sales tax.
C) they are value added taxes.
D) they are indirect taxes.
E) richer households can avoid paying sales taxes while poorer households cannot.

Question 68

FIGURE 18- 1
Refer to Figure 18- 1. A lump- sum tax is illustrated by curve(s)

A) A and B.
B) B and C.
C) C and D.
D) B only.
E) D only.

Question 69

The diagram below shows supply and demand diagrams (S and D) for some product. The government then imposes an excise tax. The new supply curve is ST. FIGURE 18- 4
Refer to Figure 18- 4. What is the dollar value of the direct burden of this tax?

A) $450
B) $90
C) - $30
D) $180
E) $30

Question 70

In 2008, tax revenues collected by all levels of government amounted to approximately what proportion of Canada's Gross Domestic Product (GDP)?

A) 48 percent
B) 38 percent
C) 8 percent
D) 18 percent
E) 28 percent

Question 71

Some important taxes are regressive, such as provincial sales taxes. In an effort to achieve proportionality in the overall tax system it is therefore necessary to impose

A) consumption taxation.
B) substantial progressivity in income taxes.
C) a flatrate tax.
D) a negative income tax.
E) efficiency in the tax system.

Question 72

Which of the following best describes the policy implications of a Laffer curve?

A) Policy makers should eliminate tax deductions and maximize revenue at any given tax rate.
B) Policy makers should eliminate tax loopholes and maximize revenue at any given tax rate.
C) Policy makers should carefully consider whether a given increase in tax rates would increase or decrease tax revenues.
D) Policy makers should set the tax rate as low as possible to maximize tax revenue.
E) Policy makers should avoid taxes on income as they decrease the work incentive.

Question 73

The Goods and Service Tax (GST) taxes

A) the value of a firm's inputs in its production process.
B) the total value of a good at each step of the production process.
C) each firm's contribution to the value of final output.
D) the total value of a firm's output.
E) the retail value of all goods.

Question 74

The Canadian federal government's system of "equalization payments"

A) are made by provinces with above- average tax capacity to the federal government.
B) are made to provinces with inadequate "tax room."
C) are made by richer provinces to poorer provinces in the form of no- interest loans.
D) are made out of the federal government's general revenues to provinces with below- average tax capacity.
E) were established in 1867 between the original provinces of Canada as a means of equalizing living standards across the country.

Question 75

The table below shows 2009 federal income- tax rates in Canada. $\begin{array}{|l|l|}\hline \text { Taxable Income } & \text { Mar ginal Tax Rate } \\\hline \$ 0-\$ 40726 & 15 \text { percent } \\\hline \$ 40727-\$ 81452 & 22 \text { percent } \\\hline \$ 81453-\$ 126264 & 26 \text { percent } \\\hline \$ 126265 \text { and over } & 29 \text { percent } \\\hline\end{array}$
$\text { TABLE 18- } 1$

-Refer to Table 18- 1. If an individual had a taxable income of $120 000, how much federal tax would be due from the earnings taxed at the rate of 26 percent?

A) $497
B) $5639
C) $8960
D) $10 022
E) $31 200

Question 76

A tax that takes a smaller percentage of income as the income increases is called

A) an excise tax.
B) a progressive tax.
C) an efficient tax.
D) a proportional tax.
E) a regressive tax.

Question 77

A "poverty trap" refers to the situation where

A) low- income persons whose only income for a period of 5 or more years has been welfare benefits.
B) low- income persons whose only income for a period of 2 or more years has been welfare benefits.
C) tax- generated disincentives exist for middle- income persons to increase their earned income.
D) the government has imposed a negative income tax.
E) tax- generated disincentives exist for very- low- income persons to increase their earned income.

Question 78

According to Statistics Canada's definition, the percentage of families living below the poverty line in Canada in 2006 was about

A) 25 percent
B) 20 percent.
C) 13 percent.
D) 10 percent.
E) 4 percent.

Question 79

If there were "horizontal equity" between all households in Canada, then

A) households with identical abilities to pay would bear the same tax burden.
B) all households would pay the same percentage of income as tax.
C) households of the same size would share the same tax burden.
D) there would be equity between different income classes.
E) individuals in the same age group would share the same tax burden.

Question 80

The table below shows 2009 federal income- tax rates in Canada. $\begin{array}{|l|l|}\hline \text { Taxable Income } & \text { Mar ginal Tax Rate } \\\hline \$ 0-\$ 40726 & 15 \text { percent } \\\hline \$ 40727-\$ 81452 & 22 \text { percent } \\\hline \$ 81453-\$ 126264 & 26 \text { percent } \\\hline \$ 126265 \text { and over } & 29 \text { percent } \\\hline\end{array}$
$\text { TABLE 18- } 1$

-Refer to Table 18- 1. If an individual had a taxable income of $120 000, how much federal tax would be due from the earnings taxed at the rate of 22 percent?

A) $1629
B) $5639
C) $8960
D) $17 919
E) $34 800