02.02 Sharing With Uncle Sam Quiz

(02.02 LC) A state's sale tax is 8%. This places a higher burden on low income individuals. What type of tax system does this represent? A) Direct B) Regressive C) Progressive D) Proportional

B) Regressive CORRECT In a regressive tax system, the tax rate is the same regardless of income. Therefore, a low income individual is responsible for paying the same tax rate as a high income individual.

(02.02 MC) The following events result in a tax. Which is an example of a direct tax? A) Charles sells his 25-acre lot, which includes a pole barn. B) Sammy stops to pump gas on a cross-country road trip. C) Ingrid's cable bill contains extra fees that weren't listed in the plan. D) Javier owes money to the federal government based on his earnings.

D) Javier owes money to the federal government based on his earnings. CORRECT Javier must pay income taxes on his income. Income tax is a direct tax. The other options illustrate taxes on the sale of property, gasoline tax, and a service tax.

(02.02 LC) Which type of tax system has the same rate for all income levels? A) Direct B) Regressive C) Progressive D) Proportional

D) Proportional CORRECT In a proportional tax system, the tax rate is the same for all income levels. For example, a tax rate of 25% is the same for everyone. However, the dollar amount paid in taxes varies from person to person based on their income. The more money a person makes, the more they pay.

(02.02 MC) Suppose you live in a state with a regressive sales tax system. You earn $20,000 a year. You pay 5% sales tax on items bought from a local hardware store. What percentage of sales tax would a person who makes twice as much money as you pay for merchandise at the same hardware store? A) 2.5% B) 5% C) 7.5% D) 10%

B) 5% CORRECT In a regressive tax system, the tax rate is same regardless of income level. A person who earns $20,000 a year and a person who earns $40,000 a year pay the same percentage of sales tax. It's called a regressive tax because the proportion of income that goes toward taxes decreases as you earn more income.

(02.02 LC) What type of tax system does the United States government use to collect income taxes? A) Federal B) Regressive C) Progressive D) Proportional

C) Progressive CORRECT In a progressive tax system, as your income increases the percentage of taxes paid to the government also increases. This is the system used in the United States.