Chapter 20: Taxation and the Public Budget

The federal government calculates taxes by fiscal year, which begins on the first day in _____ of one calendar year and runs through the last day in _____ of the following year.

- october - september

Economists and policymakers classify taxes in one of three categories. These three categories are which of the following?

- proportional - progressive - regressive

_____ incidence of the tax has no effect on the _____ incidence of the tax.

- statutory - economic

With a tax, the value of the _____ that is lost to buyers and sellers but converted into tax revenue may be transferred to someone else through _____ policies, but it is not lost.

- surplus - government

Under a _____, the consumer and producer surplus that is no longer generated is _____ loss.

- tax - deadweight

Let's say that you are a single person who earned $30,000 in 2017. Using that tax table from the book (Table 20.1), your average tax rate is

13.55%

Let's say that you are a single person who earned $34,000 in 2010. Using that tax table from the book (Table 20.1), your average tax rate is

13.72%

Capital gains are taxed separately from other types of income, under the appropriately-named

capital gains tax.

Deadweight loss is usually considered a _____ of taxation.

cost

If a tax is implemented in an already-efficient market, it causes _____ loss.

deadweight

_____ loss is value that disappears as the result of a tax.

deadweight

When a government spends more than it earns in revenue, we say that it has a budget _____.

deficit

Who actually loses surplus as a result of the tax is the _____ incidence of the tax.

economic

A budget deficit occurs when

a government spends more than it earns in revenue.

A payroll tax is is deducted directly from your paycheck, and

is used to pay for Social Security and Medicare.

In the United States, the sale of a house that was used as a primary residence is taxed at a _____ rate than other real estate.

lower

Which of the following is not one of three categories economists and policymakers use to classify taxes?

marginal

Taxes drive a wedge between the

price paid by buyers and the price received by sellers.

In the United States, the corporate income tax is _____.

progressive

Which of the following is not one of the three concepts useful in evaluating the costs and benefits of alternative types of taxes?

quantity

Tax per unit x Number of units equal total _____ from a tax.

revenue

A non-specific tax based on the value of a good or service being purchased is called a

sales tax.

Which three of the following concepts are particularly useful in evaluating the costs and benefits of alternative types of taxes?

- Incidence - Revenue - Efficiency

One type of inefficiency of a tax is _____ burden, which represents the effort to manage and collect _____.

- administrative - taxes

The tax revenue collected is smaller in the market with price-_____ demand, because the equilibrium quantity shrinks more than in a market with a price-_____ demand.

- elastic - inelastic

A tax may create a(n) _____, and the revenue it generates may be used to fix another _____.

- inefficiency - inefficiency

All else equal, imposing taxes in markets where demand and supply are price-_____ not only causes less _____ but also raises more _____.

- inelastic - inefficiency - revenue

The _____ that is lost to buyers and sellers but converted into tax _____ is not considered a cost, because the the money funds public services.

- surplus - tax revenue

Calculating the revenue raised by a tax is simple: Multiply the _____ rate by the _____ of units of the thing being taxed.

- tax - number / quantity

To determine revenue from a _____ on a toll road, multiply the fee per car by the _____ of cars.

- tax - number / quantity

Who is legally obligated to pay the tax to the government is the _____ incidence of the tax.

statutory

Total revenue from a tax =

Tax per unit x Number of units.

In the United States, smaller corporations pay _____ percentage of their income compared to larger corporations.

a smaller

Two types of inefficiencies associated with taxes are

administrative burden and deadweight loss.

The net _____ effect of a tax is specific to each tax, and to each use of government proceeds from the tax.

efficiency or inefficiency

A proportional income tax is sometimes called a "_____ tax."

flat

With a tax that is _____, people are taxed in proportion to their income.

flat

Suppose a person earning $20,000 pays 20 percent of income in taxes and a person earning $200,000 pays 20 percent of income in taxes. This tax is _____.

flat / proportional

_____-income countries, especially those with extensive government-provided social benefits, tend to collect taxes that represent a greater share of their GDP.

high

Taxes change behavior because they alter the _____ faced by market participants.

incentives

The value of the surplus that is lost to buyers and sellers but converted into tax revenue

may be transferred to someone else through public policies, but it is not lost.

Tax _____ allows governments to provide goods and services to citizens, from national defense to highway building.

revenue

Deadweight loss is value that can disappear as the result of a _____.

tax

The concept of _____ incidence describes how a tax burden is distributed among buyers and sellers, old people or young people, rich people or poor people, and so on.

tax

_____ change behavior because they alter the incentives faced by market participants.

taxes

In an efficient market, a tax causes the demand curve to shift down by the amount of the tax because

the effective price paid by consumers is now higher at any given market price.

The surplus that is lost to buyers and sellers but converted into tax revenue is not considered a cost, because

the tax revenue funds public services.

A main purpose of taxes is

to raise public revenue.

True or false: Just because a tax creates inefficiency does not necessarily mean that the tax is bad.

true

True or false: Taxes result in a lower equilibrium quantity of the good or service being consumed.

true

A _____ tax is a tax on the wages paid to an employee.

wage / payroll

The concept of incidence is used to describe

who bears the burden of any sort of tax.