Homework: Chapter 6 Homework

Which of the following statements is TRUE of static tax​ analysis?

A government receives higher tax revenues by raising the tax rate

Which of the following is an argument that the incidence of corporate taxation falls entirely on​ consumers?

Corporations pass their tax burdens on to consumers by charging higher prices.

Local government expenditures depend on which​ taxes?

Local​ property, sales, and excise taxes

Which of the following is the largest component of federal spending​ today?

Social Security

Ad valorem taxes

are assessed as a percentage of a​ good's price.

Sales taxes are

assessed on the prices paid on a large set of goods and services

The Social Security program is financed directly from

payroll taxes

Reduction or elimination of dividend taxes is​ designed, in​ part, to

reduce the double taxation burden on individuals.

According to the static tax analysis approach to evaluating how changes in tax rates affect government tax​ collections, (138)

the tax rate will have no effect on the tax base

Which of the following explains the difference between the average tax rate and the marginal tax​ rate?

The average tax rate uses total income while the marginal tax rate refers to the tax rate of the last dollar earned. (The average tax rate is the total tax payment divided by total income while the marginal tax rate refers to the tax rate of the last dollar earned.) (While the average tax rate uses total​ income, the marginal tax rate does not refer to the tax rate of the first dollar earned.)

An excise tax of 60 cents is levied on a product. As a result of the​ tax, the price of the product goes from​ $1 to​ $1.40. Which of the following is​ true?

The consumer pays the majority of the tax but not the entire tax (Since consumers pay 40 cents​ more, and the tax is 60​ cents, consumers pay the majority of the tax. )

The sales tax rate applied to all purchases within a state was 0.04​ (4 percent) throughout 2012 but increased to 0.05 ​(5 percent​) during all of 2013. The state government collected all taxes​ due, but its tax revenues were equal to​ $40 million each year. ... Within this​ state, the sales tax base from 2012 to 2013 must have... ...Which of the following could account for this change in the tax​ base?...

... declined ... A weaker state economy & People avoiding the purchase of taxable items.

For all employee earnings subject to Social Security​ taxes, what is the current Social Security tax rate for​ employees?

6.2%

Excise Tax

A tax levied on purchases of a particular good or service

A capital gain results when

An asset is sold for more than it was purchased

Which of the following is consistent with dynamic tax​ analysis?

An increase in the tax rate will likely cause a decrease in the tax base (When a government raises its sales tax​ rate, for​ example, consumers have an incentive to cut back on their purchases of items subjected to the higher​ rate, perhaps by buying them in a locale where there is a lower sales tax rate or perhaps no tax rate at all.)

Which of the following is the most important source of revenue for the federal​ budget?

The federal personal income tax. (The federal personal income tax accounts for about​ 43% of all federal revenues and is paid by all American​ citizens, resident​ aliens, and most others who earn income in the United States.)

The corporate income tax in the United States

results in​ individuals' being doubly taxed on corporate earnings. (Because individual stockholders must pay taxes on the dividends they​ receive, which are paid out of​ after-tax profits by the​ corporation, corporate profits are taxed twice.)

A typical capital gain is experienced by

selling stock or a mutual fund

Imposing a tax on sales of a product

shifts the market supply curve for the product.

A proportional​ tax, or​ flat-rate tax

takes the same percentage of a​ person's taxable income in tax regardless of their level of income. (Under a proportional or​ flat-rate system of​ taxation, taxpayers at all income levels end up paying the same percentage of their income in taxes.)

The main source of government funding is

taxes (second source)

The marginal income tax rate is equal to

the change in the tax payment divided by the change in income.

The marginal tax rate shows (132)

the extra tax due on an extra dollar of income.

The original impetus for Social Security was

to provide retirement fund for all persons