Sources of Government Revenue-practice

Which of the following reasons explains how giving reductions (also known as tax breaks) on property taxes at the local level often results in a long-term boost in property tax revenues? A. The sales tax rises along with property taxes. B. The corporate income tax rises when the property tax falls. C. When the tax reductions expire, the businesses move to a different state. D. The tax reductions often expire after a few years, but the businesses stay.

D. The tax reductions often expire after a few years, but the businesses stay.

Excise taxes are collected by which levels of government? i. Local government ii. State government iii. Federal government

D. ii and iii only

The process by which income taxes are deducted directly from your paycheck is called __________. A. payroll pullouts B. payroll taxation C. payroll induction D. payroll withholding

D. payroll withholding

One of the ways that has been suggested to alleviate the burden of taxation on the average citizen is lowering the income tax. Explain how this move would affect the revenue stream for federal, state, and local governments in regard to income tax revenue and sales tax revenue.

Responses will vary. A sample response follows:Local: Lowering the income tax would definitely help raise funds for local governments without hurting any other revenue stream because local governments don't collect income taxes. With lower income taxes, there is more money for each family to spend and more opportunities for local governments to collect sales tax. State Government: Revenue is gained and lost in for state governments. Money is lost if the income tax is reduced, because the states do collect income taxes. However, states also collect the bulk of the sales tax, and the more money that consumers get to keep, the more money they'll spend buying products that can be taxed. Federal Government: This move would be bad for the federal government's revenue stream. Lowering the income tax means less revenue coming into the federal government, and the federal government does not collect sales taxes.

Which of the following is a way for states or local governments to raise revenues immediately? A. raise the sales tax B. raise the property tax C. raise the state income tax D. raise the corporate income tax

A. raise the sales tax

Sales tax is paid on April 15 by consumers using receipts that they collect over the year.

F

The three main types of federal taxes are income tax, excise tax, and payroll tax. Briefly describe each.

Federal Income Tax: The federal income tax is the largest revenue building power possessed by the federal government. This means that each citizen must give a certain percentage of their income to the federal government. Payroll Tax: These taxes are deducted directly from your payroll and pay for programs such as Social Security, unemployment insurance, and Medicare. Excise Tax: An excise tax is a tax given to the producer of an item that is to be sold elsewhere. The excise tax is usually included when the producer sells the item to the retailer/seller.

A friend approaches you with his first paycheck. He is confused to see that money was taken away from his check by the federal government for several programs. Explain the concept of payroll taxes to him, including how it works and where the money goes.

Payroll taxes are deducted from every employee's paycheck. These payroll taxes are not part of the yearly income taxes that are owed every year on April 15. A payroll tax is a form of income tax and pays for many important government programs like Medicare and Social Security.

Explain how a sales tax works and how the money makes its way to government.

Sales tax is only collected by local and state governments. The federal government does not collect sales tax. Sales tax is collected on certain items (usually determined by the state government) at the time of purchase and is included in the cost of the item. The money collected from sales tax is reported and sent to local and state governments at regular intervals.

Identify and describe the purposes of taxation.

The primary purpose of taxation is to collect revenue for the federal government. This revenue has several purposes. First and foremost, this revenue pays for government programs. It also pays for the salaries of government workers, including politicians, and supplies government offices with the equipment and materials needed to conduct their duties. Additionally, government revenue is a guarantee that all citizens are participating in the everyday functions of government.