Chapter 20: Taxation and the Public Budget
The federal government calculates taxes by fiscal year, which begins on the first day in _____ of one calendar year and runs through the last day in _____ of the following year.
- october - september
Economists and policymakers classify taxes in one of three categories. These three categories are which of the following?
- proportional - progressive - regressive
_____ incidence of the tax has no effect on the _____ incidence of the tax.
- statutory - economic
With a tax, the value of the _____ that is lost to buyers and sellers but converted into tax revenue may be transferred to someone else through _____ policies, but it is not lost.
- surplus - government
Under a _____, the consumer and producer surplus that is no longer generated is _____ loss.
- tax - deadweight
Let's say that you are a single person who earned $30,000 in 2017. Using that tax table from the book (Table 20.1), your average tax rate is
13.55%
Let's say that you are a single person who earned $34,000 in 2010. Using that tax table from the book (Table 20.1), your average tax rate is
13.72%
Capital gains are taxed separately from other types of income, under the appropriately-named
capital gains tax.
Deadweight loss is usually considered a _____ of taxation.
cost
If a tax is implemented in an already-efficient market, it causes _____ loss.
deadweight
_____ loss is value that disappears as the result of a tax.
deadweight
When a government spends more than it earns in revenue, we say that it has a budget _____.
deficit
Who actually loses surplus as a result of the tax is the _____ incidence of the tax.
economic
A budget deficit occurs when
a government spends more than it earns in revenue.
A payroll tax is is deducted directly from your paycheck, and
is used to pay for Social Security and Medicare.
In the United States, the sale of a house that was used as a primary residence is taxed at a _____ rate than other real estate.
lower
Which of the following is not one of three categories economists and policymakers use to classify taxes?
marginal
Taxes drive a wedge between the
price paid by buyers and the price received by sellers.
In the United States, the corporate income tax is _____.
progressive
Which of the following is not one of the three concepts useful in evaluating the costs and benefits of alternative types of taxes?
quantity
Tax per unit x Number of units equal total _____ from a tax.
revenue
A non-specific tax based on the value of a good or service being purchased is called a
sales tax.
Which three of the following concepts are particularly useful in evaluating the costs and benefits of alternative types of taxes?
- Incidence - Revenue - Efficiency
One type of inefficiency of a tax is _____ burden, which represents the effort to manage and collect _____.
- administrative - taxes
The tax revenue collected is smaller in the market with price-_____ demand, because the equilibrium quantity shrinks more than in a market with a price-_____ demand.
- elastic - inelastic
A tax may create a(n) _____, and the revenue it generates may be used to fix another _____.
- inefficiency - inefficiency
All else equal, imposing taxes in markets where demand and supply are price-_____ not only causes less _____ but also raises more _____.
- inelastic - inefficiency - revenue
The _____ that is lost to buyers and sellers but converted into tax _____ is not considered a cost, because the the money funds public services.
- surplus - tax revenue
Calculating the revenue raised by a tax is simple: Multiply the _____ rate by the _____ of units of the thing being taxed.
- tax - number / quantity
To determine revenue from a _____ on a toll road, multiply the fee per car by the _____ of cars.
- tax - number / quantity
Who is legally obligated to pay the tax to the government is the _____ incidence of the tax.
statutory
Total revenue from a tax =
Tax per unit x Number of units.
In the United States, smaller corporations pay _____ percentage of their income compared to larger corporations.
a smaller
Two types of inefficiencies associated with taxes are
administrative burden and deadweight loss.
The net _____ effect of a tax is specific to each tax, and to each use of government proceeds from the tax.
efficiency or inefficiency
A proportional income tax is sometimes called a "_____ tax."
flat
With a tax that is _____, people are taxed in proportion to their income.
flat
Suppose a person earning $20,000 pays 20 percent of income in taxes and a person earning $200,000 pays 20 percent of income in taxes. This tax is _____.
flat / proportional
_____-income countries, especially those with extensive government-provided social benefits, tend to collect taxes that represent a greater share of their GDP.
high
Taxes change behavior because they alter the _____ faced by market participants.
incentives
The value of the surplus that is lost to buyers and sellers but converted into tax revenue
may be transferred to someone else through public policies, but it is not lost.
Tax _____ allows governments to provide goods and services to citizens, from national defense to highway building.
revenue
Deadweight loss is value that can disappear as the result of a _____.
tax
The concept of _____ incidence describes how a tax burden is distributed among buyers and sellers, old people or young people, rich people or poor people, and so on.
tax
_____ change behavior because they alter the incentives faced by market participants.
taxes
In an efficient market, a tax causes the demand curve to shift down by the amount of the tax because
the effective price paid by consumers is now higher at any given market price.
The surplus that is lost to buyers and sellers but converted into tax revenue is not considered a cost, because
the tax revenue funds public services.
A main purpose of taxes is
to raise public revenue.
True or false: Just because a tax creates inefficiency does not necessarily mean that the tax is bad.
true
True or false: Taxes result in a lower equilibrium quantity of the good or service being consumed.
true
A _____ tax is a tax on the wages paid to an employee.
wage / payroll
The concept of incidence is used to describe
who bears the burden of any sort of tax.
