Econ: Chapter 14
True or false: The budget process at the local level varies considerably from one local government to the next.
True
Which of the following is most like a national sales tax?
VAT
From whom or what do state governments receive the majority of their funds?
Federal government
four largest categories of local government revenue
Intergovernmental Revenue Property taxes Sales taxes Hospital revenue
match the rank order of each expenditure category below for state governments.
Intergovernmental expenditures Public Welfare Higher Education State employee retirement Unemployment and workers compensation
What item appears in both state and local revenue sources that does NOT appear as a federal government revenue source?
Intergovernmental revenue
largest sources of local government revenue with their rank order.
Intergovernmental revenue Property taxes Sales taxes and gross receipts Hospital revenue
The _________________ is the branch of the U.S. Treasury Department that collects taxes.
Internal Revenue Service
What is a sin tax?
It is a tax designed to reduce consumption of products that are socially undesirable.
four largest sources of state revenue by their ranking.
Largest - Intergovernmental revenue Second - Employee Retirement Third - Sales taxes and gross receipts Fourth - Individual income taxes
What are spending caps?
Legal limits on annual discretionary spending
Which level of government has primary responsibility for funding elementary and secondary education?
Local
Why do local governments regulate natural monopolies rather than break them up into competing companies?
Natural monopolies are a market structure in which average costs of production are lowest when all output is produced by a single firm, and they can charge higher prices if not regulated.
What is a fiscal year?
October 1 to September 30 12 month financial period that doesn't have to coincide with the calendar year
Which level(s) of government both receive and distribute intergovernmental revenues?
Only the state level
Why is resource allocation affected by taxes on products and services?
People buy less of a product or use a service less, so companies allocate less to production.
What is the benefit principle of taxation?
People pay a tax according to how much they use a product or service.
personal income tax rate that applies to cases in which taxes would otherwise fall below a certain level
alternative minimum tax
Each House subcommittee prepares a(n) ___________, authorizing spending for certain purposes.
appropriations bill
annual budget in which expenditures equal revenues
balanaced budget
What is the main purpose of a sin tax?
behavior adjustment
"Those who benefit from government goods and services should pay in proportion to the amount of benefits they receive." So states the ______ .
benefit principle
The debt ceiling is the total amount of money that the U.S. government is authorized to ______ to meet existing commitments.
borrow
profits from the sale of an asset held for 12 months or longer
capital gains
Which type of tax is levied on the sale of an asset held for 12 months or longer?
capital gains tax
line item budget expenditure that circumvents normal budget building processes and procedures and benefits a small number of people or businesses
earmarks, or pork
The largest category of local government expenditures is _____ and ____ education.
elementary, secondary
program or benefit that uses established eligibility requirements to provide health, nutritional, or income supplements to individuals
entitlement
An economist might argue that a progressive income tax is effective because it is ______ .
equitable
Which type of tax is levied on specific items or services, including gasoline and telephone services?
excise tax
general revenue tax levied on the manufacture or sale of selected items
excise tax
If I have more _____ than _____, I have a ______.
expenditures; revenues; deficit
proportional tax on individual income after a specified threshold has been reached
flat tax
_________________ of a tax is the term for the final burden of the tax.
incidence of a tax
the final burden of a tax
incidence of tax
The largest tax levied on the wages, salaries, and other income of individuals is known as the _________________ tax.
individual income tax
Which of the following is the single largest source of federal revenue?
individual income tax
The tax code is indexed to compensate for ______ .
inflation
"The most important source of state government revenue." "Primarily transferred from federal government to state governments." "The most important source of local government revenue." All of these statements are true of ______ .
intergovernmental revenue
funds that one level of government receives from another level of government
intergovernmental revenue
According to bar graph here, the largest source of state government revenue is from _____ revenue. The second-largest source is employee _____, followed by ____ taxes and individual _____ taxes.
intergovernmental, retirement, sales, income
Elementary schools, police departments, and electrical service are typically paid for by ______ .
local government
At the local level, power to approve spending often rests with the ____ , the city ______ , the county ______ , or some other elected representative or body.
mayor, council, judge
the total amount borrowed from investors to finance the government's deficit spending
national debt
the total amount borrowed from investors to finance the government's deficit spending
national debt
Which of the following is NOT an example of federal mandatory spending?
national defense
Which of the following could be considered a synonym for FICA?
payroll tax
per person basis; total divided by population
per capita
that part of the economy made up of private individuals and businesses
private sector
In discussing taxes, which is the opposite of regressive?
progressive
A general state or city tax levied on a product at the time of sale is called a _________________ .
sales tax
Which of the following is the single largest federal expenditure?
social security
True or false: The budget process each state follows is fairly uniform from one state to the next.
False
What type of tax is Medicare?
A proportional tax
What is the alternative minimum tax?
A tax rate that applies when taxes paid fall below a certain amount
An effective tax is one that exhibits one or more of the following characteristics.
All of the Above: Equity, Simplicity, Efficiency
When is VAT added to a product's price?
At every stage of production
four largest categories of local government spending
Elementary and secondary education Utilities Hospitals Police protection
What are intergovernmental expenditures?
Expenditures that one level of government makes to a lower level of government
The term "intergovernmental revenue" refers to
Funds that one level of government distributes to another level of government. The revenue state governments receive from the federal government.
What is the primary source of revenue for the government?
Individual income taxes
Which of the following is not a significant revenue source for local governments?
Individual income taxes
What are the criteria for effective taxes?
Simplicity, efficiency, and equity
Expenditures for what government program are considered mandatory spending?
Social Security
How do taxes transfer purchasing power from the private sector to the public sector?
Taxes reduce the amount of money people have to spend, and increase the amount of spending that the government can do.
Which statement is most accurate?
The debt ceiling permits borrowing for expenditures that have already been authorized by Congress and the president.
What is the incidence of a tax?
The final burden of a tax
Which level of government has the largest portion of its expenditures on hospitals?
The local level
What is the relationship between the national debt and the budget of the federal government?
The national debt grows whenever the government runs a deficit. The debt shrinks when the government runs a surplus.
What role does a tax assessor play in determining property taxes?
The tax assessor determines the value of property that will be taxed.
What effect did the tax cuts of 2003 have?
They caused the government to have a bigger deficit.
What is the average tax rate?
Total taxes paid divided by the total taxable income
T/F Some states have biannual budgets, which cover two years at a time, and other states have a balanced budget amendment—a constitutional provision requiring that annual spending not exceed revenues.
True
How does a balanced budget amendment work?
When revenue drops below spending levels, spending must, according to state law, be curtailed.
The property tax is a tax on ____ and ____ possessions and is the second-largest revenue source for local governments.
tangible and intangible
Exceptions or oversights in the tax law that allow taxpayers to avoid taxes are called _________________ .
tax loopholes
Which is the primary source of revenue for the federal government?
taxes
Higher-than-normal interest rates caused by heavy government borrowing hurts private borrowers through ______ .
the crowding-out effect
One of the reasons it has been so difficult for Congress to bring federal spending under control is because
the federal budget has many entitlements that people do not want cut.
payments for which the government receives neither goods nor services in return
transfer payments
The terms proportional, progressive, and regressive refer to ______ .
types of taxes
tax on the value added at every stage of the production process
value-added tax (VAT)
Which of the following best identifies the incidence of the individual income tax?
workers