Econ Chapter 8: Taxes and Spending

When preparing federal income taxes, taxpayers may use a tax table such as the one shown here to find how much income tax they owe. Use this table to determine the tax owed on a taxable income of $10,271 by an unmarried person who is not head of a household.

$1,095

In this illustration, approximately what share of taxable income does the highest earner actually pay in taxes?

24 percent

This passage from the Constitution supports which of the following statements?

A national tax cannot be levied at different rates in different states.

How are Social Security, Medicaid, and the unemployment insurance program related?

All are mandatory spending programs.

What does this photograph suggest about the challenges facing lawmakers who may want to address concerns about funding for major entitlements?

Attempts to change the program often meet with strong opposition.

What does this graph show about who pays for a $.50 tax increase on a given good in a market where demand for the good is elastic?

Consumers pay $.10 and suppliers absorb $.40 of the tax increase.

What does this graph imply about how a $.50 tax increase is ultimately paid in a market where demand for the good taxed is inelastic?

Consumers pay $.40 and suppliers absorb $.10 of the tax increase.

Suppose Congress decides to cut total federal spending by 10 percent in its annual budget legislation. Which is the largest category on this graph that they would be able to reduce?

Defense

Why does debate over the budget in Congress often focus on spending for defense?

Defense is the largest category of discretionary spending.

The humor behind this cartoon is based on what observation about federal income taxes?

Even lower-income people may have to pay income taxes.

Look at this circle graph, and consider who pays the taxes that make up each section of it. Which statement BEST summarizes the information shown here?

Individual taxpayers are responsible for the large majority of federal receipts.

Which of the following BEST summarizes what this cartoon implies about the federal government?

It spends huge amounts of taxpayer money but always seems to need more.

The goal of the structure shown in this table is to make federal income taxes

More progressive.

In a progressive tax system, which of the following statements must be true?

People with lower incomes pay the lowest share of their income in taxes.

What point is the cartoonist making about federal funding of projects at the state and local level?

States depend on funding from the national government for many infrastructure projects.

This graph supports which of the following statements?

Tariffs today mostly serve to protect certain industries.

Refer to the table above to answer this question: Which of the following illustrates the progressive structure of the federal income tax?

Taxable income of $180,000 is taxed at a higher rate than a taxable income of $80,000.

Which of the following will MOST LIKELY happen soon after a natural disaster such as the one shown here?

The federal government will provide relief to victims and help fund the recovery.

Which of the following statements is supported by this graph?

The higher the income, the lower the share of income paid in sales and excise taxes.

What point is this cartoonist making?

The retirement needs of aging baby boom will be very difficult for Social Security to support.

What principle of equity is illustrated by this diagram?

The share of income paid in taxes should vary based on ability to pay.

This passage might have come from a news story that is discussing which of the following?

an excise tax

Which of the following has likely contributed most to the development shown in this graph?

an excise tax

The policy change discussed here would likely have the greatest impact on

discretionary spending.

A significant part of federal aid to state and local governments goes toward

funding social programs.

A city that wants to raise tax revenue from tourists would likely do which of the following?

impose a tax on meals served at restaurants

Which government tax program would most likely support the installation on the roof in the photo?

income tax credits

If the United States completely eliminated all tariffs, what would the result MOST LIKELY be?

increased free trade

The public good illustrated here is typically paid for by

local property taxes.

This quote is explained by the fact that the spending on these programs is

mandatory

Spending represented by the program referred to in this photograph would come from

mandatory spending.

What kind of tax is most likely the major source of revenue that supports these workers?

property taxes

Which type of tax is levied at the same percentage for people at all income levels?

proportional

States recognize the economic importance of having a skilled workforce. This is one reason states invest taxpayer dollars in

public education

Which type of tax takes a higher percentage of income from poorer people than from wealthier people?

regressive

According to the 24th Amendment, it is illegal to

require payment of a tax in order to vote in national elections.

This illustration and the event it commemorates emphasize colonial Americans'

sensitivity about government's power to tax.

According to the cartoonist, what important characteristic of a tax is missing in this case?

simplicity

This passage could be referring to the impact of which of the following?

the estate tax

Which "change in the U.S. population" is this passage referring to?

the growing share of the population made up of retirees

Which of the following would be paid for MAINLY by local taxes?

the maintenance of a town's sewer and water systems

This passage highlights which of the following challenges facing Medicare?

the political difficulty of making changes to Medicare

The purchase of paper and office supplies for a state government office would be funded out of

the state's operating budget.

Which of the following features of this diagram would be most worrisome to those planning for the future of entitlement programs such as Social Security and Medicare?

the tower-like shape of the pyramid on the right

What is another name for the system described above?

withholding