GOVT 2306 Chapter 14 Review: Financing State Government

Which of the following is true of dedicated and nondedicated revenue in Texas? -The low overall percentage of nondedicated revenue compared to dedicated revenue limits the capacity for budget changes. -Constitutional amendments to make budget changes by changing levels of dedicated revenue are relatively easy to pass compared to other constitutional amendments. -Nondedicated revenue is largely earmarked by constitutional provision. -Dedicated revenue is also known as discretionary funding.

The low overall percentage of nondedicated revenue compared to dedicated revenue limits the capacity for budget changes.

Which of the following is true of the recent trend in collection of nontax revenue? - The trend in recent years has been to increase service charges and fees as a way to increase revenue and avoid raising taxes. - The trend in recent years has been to increase service charges and fees for education but to decrease them for most other state services. - The level of service charges and fees has stayed flat in recent years because legislators fear negative public reactions. - The trend in recent years has been to decrease service charges and fees as federal contributions to state revenue have increased.

The trend in recent years has been to increase service charges and fees as a way to increase revenue and avoid raising taxes.

What is meant by the "nonrivalrous consumption" quality of a public good? -The government chooses who consumes the good, eliminating competition or rivalry for the good. -The use of a good by a person or persons does not diminish the availability of that good for others to use or enjoy. -The person or persons benefiting from the good are not aware of that benefit. -The good is something that occurs naturally; it is not something the government is capable of providing.

The use of a good by a person or persons does not diminish the availability of that good for others to use or enjoy.

What roadblock to the establishment of a personal income tax in Texas was established in 1992? -a constitutional amendment that prohibits a personal income tax -legislation requiring a constitutional amendment to initiate a personal income tax -a constitutional amendment requiring a supermajority of the legislature to enact a personal income tax -a constitutional amendment requiring voter approval before the legislature could enact a personal income tax

a constitutional amendment requiring voter approval before the legislature could enact a personal income tax

Business taxes in Texas are limited to -corporate sales taxes. -a corporate consumption tax. -a corporate investment tax. -a corporate franchise tax.

a corporate franchise tax

The incidence of a tax refers to the -ability of the government to collect the tax. -actual payer of the tax. -amount of money generated by a tax. -person that shifts the tax to others.

actual payer of the tax

Taxes that individuals pay when they buy goods and services are ______ taxes. -consumer -franchise -per capita -proportional

consumer

Since 2012, property taxes collected by local government has consistently -decreased. -stayed the same. -increased

increased

Local governments collect and pay for ________ the cost of government in Texas. -about one-quarter -just over one-half -just over three-quarters -about one-third

just over one half

The states of Texas, Florida, and Washington are all roughly equivalent in their dependency on consumer taxes. What common characteristic do they share related to this? -biennial legislative sessions -high dependency on extraction of natural resources -very low federal funding -lack of a personal income tax

lack of a personal income tax

What aspect of a state's tax system seems to indicate a high level of regressivity? -lack of a corporate income tax -lack of a personal income tax -a proportional income tax -a low consumer sales tax

lack of a personal income tax

Which of the following is not a top revenue source for Texas? -federal funding. -property taxes. -lottery revenue -sales tax

lottery revenue

What is/are an example of a toll good? -subsidized housing -public education -natural resources -national parks

national parks

Fire Protection would be considered -non-exclusive -exclusive.

non-exclusive

How did the legislature change the franchise fee in 2007? -It was eliminated. -It was expanded to most kinds of businesses. -It was expanded to include both business earnings and investment -income. It was reduced to encourage business investment.

It was expanded to most kinds of businesses.

When economic conditions are bad, state tax revenues in Texas -are unaffected. -decrease. -increase. -must be shared with the federal government.

decrease

Public housing would be considered -exhaustive. -non-exhaustive.

exhaustive

True or false: Compared to other states, Texas has relatively low property taxes.

false

Taxes that take the same percentage of income from all citizens are called __________ taxes

proportional

What is the primary source of revenue for state governments? -taxes on corporations -taxes on citizens -federal grants -service charges or fees

taxes on citizens

A good is said to be nonexclusive if -you cannot practically prevent people from receiving it. -your enjoyment of that good doesn't diminish availability to others. -you can separate those who pay for the good from those who do not. -you must compete for the good.

you cannot practically prevent people from receiving it.

The three items that consume the majority of the budget in most states are which of the following? -public safety -education -environmental protection -transportation -health and welfare

-education -transportation -health and welfare

Which of the following has become increasingly dependent on the property tax in Texas? -federal government -state government -local governments -transit authorities -school districts

-local governments -school districts

What are primary sources of local tax revenue in Texas? -income taxes -local sales taxes -property taxes -business taxes

-local sales tax -property tax

In past financial crises, revenue shortfalls in Texas have been resolved by which of the following? -raising gasoline taxes -raising sales taxes -instituting a personal income tax -increasing fees

-raising gasoline taxes -raising sales taxes -increasing fees

As laid out in the text, what general tax shifting methods may businesses use to respond to a tax increase? -shifting taxes to the consumer through higher prices -making legal challenges against the tax -reducing income so the tax burden will be lower -absorbing the cost through lower profits to its shareholders/owners -shifting the taxes onto workers through lower wages

-shifting taxes to the consumer through higher prices -absorbing the cost through lower profits to its shareholders/owners -shifting the taxes onto workers through lower wages

In terms of total dollars in the state budget, the various service charges and fees in Texas provide ______ percent of total state revenue. -25 -15 -35 -5

15

By state law, the local sales tax is fixed at no more than ______ percent of the value of the sale. -5 -3 -1.5 -2

2

For fiscal years 2015 and 2016, the Texas state budget was about $________ billion. -209 -268 -75 -123

209

How many states do not have any form of personal income tax? -7 -13 -2 -19

7

How many states, including Texas, have no personal income tax? -1 -12 -3 -7

7

What percentage of the revenue on which Texas depends is from income-elastic taxes? -85-90 percent -65-70 percent -roughly 50 percent -75-80 percent

85-90 percent

How does the Texas Constitution limit welfare spending? -It limits welfare spending to no more than 1 percent of the state budget. -It limits welfare spending to no more than 5 percent of the state budget. -There is no constitutional limit on welfare spending. -It limits state welfare spending to a match of what the federal government contributes.

It limits welfare spending to no more than 1 percent of the state budget.

In Texas, under the regressive tax system, those in the top 1% of wage earners, pay approximately ______% of their income taxes. -10 -20 -12.5 -4

NOT 20

Cigarette, tobacco and alcoholic beverage taxes made up approximately ___% of the 2016-2017 Texas budget. -0 -25 -5 -45

NOT 25

Which of the following is true of property taxes in Texas? -Texas's local governments have been reducing their reliance on property taxes as a source of revenue. -Texas has one of the highest average property tax rates in the nation. -About half of property tax revenue is collected by the state and about half by local governments. -Property tax rates have been slowly falling in Texas in recent years.

Texas has one of the highest average property tax rates in the nation.

Which of the following statements about taxes based on an individual's ability to pay are accurate? -The federal income tax is a tax based on an individual's ability to pay. -Most taxes at the state level are not based on ability to pay. -Taxes based on ability to pay are benefit-based taxes. -The excise tax on gasoline is an example of a tax based on the ability to pay.

The federal income tax is a tax based on an individual's ability to pay. Most taxes at the state level are not based on ability to pay.

True or false: In Texas, consumers, not business, pay most of the taxes.

True

Which of the following is an example of tax shifting? -The legislature votes to increase the cigarette tax. -A wealthy school district is required to give some of its tax revenue to a poorer school district. -A landlord raises the rent after his property taxes go up. -A waitress does not report the cash tips she received as income.

a landlord raises the rent after his property taxes go up

Which of the following is a consumer tax? -motor vehicle sales tax -All of these answers are correct. -sales tax -tobacco tax

all of these answers are correct

Public goods and services can be provided to citizens by -state government. -local government. -all of these can provide goods and services. -private sector

all of these can provide goods and services

Texas is considered to be a(n) _____________________ average tax capacity state. -Low -Average -High

average

The excise tax on gasoline is an example of a tax based on the -need of the state. -ability to pay. -environmental cost. -benefit received.

benefit received

A state's potential to tax is call its tax ______________.

capacity

Which level of government is most heavily dependent on service charges and fees to finance their services? -county -federal -city -state

city

Heavy dependence on ______ taxes makes for an income-elastic tax structure. -income -corporate -property -consumer

consumer

The majority of tax revenue in Texas comes from -property taxes. -income taxes. -franchise taxes. -consumer taxes.

consumer taxes

What best describes Texas's franchise fee? -business property tax -tax on business expansion -corporate equipment tax -corporate income tax

corporate income tax

During the 1980s there were 10 special sessions of the Texas legislature to correct revenue shortfalls. What was the cause of these shortfalls? -reduction in federal grants under President Reagan -white flight to the suburbs -declining price of oil -inflation

declining price of oil

The funds in the state budget that are not restricted for a specific purpose are -regressive. -discretionary. -earmarked. -nonrivalrous.

discretionary

A good example of a proportional tax is the tax on -capital gains. -property investments. -earned investment income. -earned income for Medicare.

earned income for Medicare

In Texas, citizens can be excluded from all of the following for nonpayment, EXCEPT for -electricity. -education. -toll roads. -parks.

education

True or false: The increase in local government collection of tax revenues in Texas is an indication of the declining role of the federal government in funding services, especially schools.

false

Health and human services is funded primarily with -federal grants. -special excise taxes. -property taxes. -the lottery.

federal grants

Health and human services in Texas is funded mostly by -the state sales tax. -discretionary spending set by the legislature. -revenue from counties and municipalities. -federal grants to the state.

federal grants to the state

Of the following, the most nontax revenue in Texas is generated by -lottery income. -fees, fines, licenses, and penalties. -interest income. -land income.

fees, fines, licenses, and penalties.

The _______ _________ is a corporate "income tax" in Texas that is assessed on income earned by corporations in the state.

franchise fee

As of 2016-2017, what is the third-largest source of revenue for Texas state government? -sales tax -service tax -franchise fees -income tax

franchise tax

Which of the following is not an earmarked category and is part of discretionary spending? -funding for Medicaid -funding for Medicare -funding for public schools -funding for state universities

funding for state universities

The current trend in state spending indicates that local governments will be picking up a ______ share of the cost of providing services to the citizens of Texas in future. -greater -lesser

greater

About 60 percent of the money that Texas receives from the federal government is spent on -public safety. -health and human services. -transportation. -education.

health and human services

Texas spends most of the money it gets from the federal government on -border security. -health and human services. -education. -infrastructure and transportation development.

health and human services

What are the two primary sources of revenue for local government in Texas? -local sales tax and property tax -income tax and state sales tax -block grants and local sales tax -property tax and state grants

local sales tax and property tax

Taxes in Texas are considered regressive because -the same percentage of income is taken from all citizens. -the percentage of income taken depends on a citizen's age. -low-income persons pay a higher percentage of their income. -high-income persons pay a higher percentage of their income.

low-income persons pay a higher percentage of their income.

Which category of Texans, by income, pays the highest amount of sales and excise taxes as a percentage of income? -second-highest 20 percent -middle 20 percent -second-lowest 20 percent -lowest 20 percent

lowest 20 percent

As compared to the national average, a Texas family in the lowest 20 percent of income pays ______ of their income in taxes. -more -the same amount -less

more

Service charges, fees, and the lottery are sources of -income-elastic taxes. -earmarked revenue. -discretionary funding. -nontax revenue.

nontax revenue

Roughly what proportion of the Texas state budget comes from the federal government? -two-thirds -one-third -one-half -one-quarter

one-third

A person's answer to the question, "What should government do?" is influenced by their ______ ______, which is their belief about political processes and the role that government should play in society. -collective benefits -political values -patriotic feelings -public goods

political values

In recent years, most of the growth in state expenditures in Texas has been driven by -inflation. -public safety costs. -population increases. -the cost of health care.

population increases

Texas school districts are heavily dependent on revenue from -property taxes. -excise taxes. -income taxes. -sales taxes.

property taxes

Often provided by the government, goods or services that are characterized by the features of non-excludability and nonrivalrous consumption are known as ____________ ___________

public goods

Low-income people pay the highest percentage of their income through a(n) __________ tax regime.

regressive

For most taxes, showing direct benefit is problematic. Benefit received is more applicable to which of the following? -service charges or fees -value added taxes -intangible consumer benefits -sales taxes

service charges or fees

Through local sales taxes and local property taxes, local governments collect and pay ______ of the total taxes in Texas. -slightly over half -about 15 percent -about three-quarters -about one-quarter

slightly over half

Which of the following characterizes the role of the lottery in the Texas state budget? -small but growing in significance -large and increasing in significance -small and will never be significant -large but decreasing in significance

small and will never be significant

Free public education is an example of a ______ good. -social -toll -common-pool

social

Governments provide ______ goods because there is a value to society in ensuring that everyone has access to them regardless of ability to pay. -toll -social -common-pool

social

______ goods are goods and services that the public sector often provides, meaning they are exclusive and can be exhausted. -Common-pool -Toll -Social

social

Goods and services that are exclusive and can be exhausted, and are provided by both the private sector and government, are called -pure public goods. -social goods. -common-pool goods. -toll goods.

social goods

The per capita tax rate is not very informative about how much citizens actually pay because -most people refuse to disclose how much they pay in taxes. -taxes are often exported to other states. -it does not include sales taxes. -states overreport tax revenues.

states overreport tax revenues

Over the past ten years, the state's contribution for education has -steadily declined. -steadily increased. -become the main source of school funding. -remained steady.

steadily declined

Ideally, a state's tax effort will equal its -nontax revenue. -per capita tax. -tax capacity. -tax incidence.

tax capacity

Which of the following is the measure of the wealth of a state or its ability to raise revenues relative to all other states? -tax exporting -tax base -tax capacity -tax effort

tax capacity

The budget shortfalls of the 1980s in Texas were caused by drops in oil prices and were worsened by the state's -tax structure. -legislative logjams. -increased expenditures. -expanding property taxes.

tax structure

The primary source of revenue for state governments is -service charges. -taxes paid by citizens. -fees. -funding by the federal government.

taxes paid by citizens

In general, when the price of oil experiences a prolonged price increase, -the Texas economy improves and Texas state revenues decrease. -the Texas economy suffers and Texas state revenues increase. -the Texas economy suffers and Texas state revenues decrease. -the Texas economy improves and Texas state revenues increase.

the Texas economy improves and Texas state revenues increase.

Which type of government entity is typically most dependent on nontax revenues for provision of services? -the state -the federal government -the county -the city

the city

As of 2017, where did the franchise fee rate in terms of revenue sources for Texas? -third-largest source of tax revenue -one of the smallest sources of state tax revenue -next-largest source of tax revenue after property taxes -largest source of tax revenue

third-largest source of tax revenue

Goods like bridges and roads that are exclusive but not nonexhaustive are known as _____ goods. -toll -common-pool -social

toll

_________ goods are often non-exhaustive only to a certain point. (Think about toll roads and public beaches.)

toll

Goods where non-payers can effectively be prevented from utilizing but use does not reduce the benefit to other people are called -toll goods. -pure public goods. -common-pool goods. -social goods.

toll goods

True or false: In terms of the items funded, the pattern of expenditures in Texas is similar to most states.

true

True or false: The amount of tax money available in any given state depends on the wealth of the citizens of that state.

true

On average, Texas generates ______ of its revenue from its own sources. -two-thirds -one-quarter -a small percentage -one-half

two-thirds

The franchise fee does not extract money from taxable businesses -with revenues of $300,000 or less. -that conduct business in multiple states. -with revenues of $100,00 or less. -that provide a class of services deemed essential to the "public good."

with revenues of $300,000 or less