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Exam 12: The Design of the Tax System

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Question 161

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Why do some policymakers support a consumption tax rather than an earnings tax?

A) The average tax rate would be lower under a consumption tax.
B) A consumption tax would encourage people to save earned income.
C) A consumption tax would raise more revenues than an income tax.
D) The marginal tax rate would be higher under an earnings tax.

E) A) and C)
F) All of the above

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Question 162

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Which of the following is not a way that a corporate tax on the income of U.S. car companies will affect markets?

A) The price of cars will rise.
B) The wages of auto workers will fall.
C) Owners of car companies (stockholders) will receive less profit.
D) Less deadweight loss will occur since corporations are entities and not people who respond to incentives.

E) All of the above
F) A) and C)

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Question 163

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Give an example of a tax system where the marginal tax rate would equal the average tax rate.

If James earns $80,000 in taxable income and pays $20,000 in taxes, his average tax rate is 25 percent.

Which of the following types of taxes achieves vertical equity: a proportional tax, regressive tax, and/or progressive tax?

Table 12-1 -Refer to Table 12-1. Assume that the price of a weekend ski pass is $45 and that the price reflects the actual unit cost of providing a weekend of skiing. Suppose the government imposes a tax of $12 on skiing, which raises the price of a weekend ski pass to $57. How much tax revenue is collected from these four skiers?

A tax on all forms of income will

A country is using a proportional tax when

You are trying to design a tax system that will simultaneously achieve both of the following goals: 1) two people with the same total income would pay taxes of the same amount, and 2) a high-income person would pay a higher fraction of income in taxes than a low-income person. Which of the following tax systems could achieve both goals?

Because the marginal tax rate rises as income rises,

In 2009, the top 1 percent of income earners made about

Scenario 12-2 Suppose that Bob places a value of $10 on a movie ticket and that Lisa places a value of $7 on a movie ticket. In addition, suppose the price of a movie ticket is $5. -Refer to Scenario 12-2. Suppose the government levies a tax of $3 on a movie ticket and that, as a result, the price of a movie ticket increases to $8. What is the deadweight loss from the tax?

The administrative burden of complying with tax laws is a cost to the government but not to taxpayers.

Table 12-9 United States Income Tax Rates for a Single Individual, 2012 and 2013. -Refer to Table 12-9. Bill is a single person whose taxable income is $35,000 a year. What is his average tax rate in 2013?

Table 12-18 United States Income Tax Rates for a Single Individual, 2009 and 2010. -In which of the following tax systems do taxes increase as income increases?

Suppose the government imposes a tax of 10 percent on the first $40,000 of income and 20 percent on all income above $40,000. What are the tax liability and the marginal tax rate for a person whose income is $30,000?

In 2014, the largest source of receipts for state and local governments was individual income taxes.

What is the marginal tax rate of a lump-sum tax of $5,000?

Table 12-9 United States Income Tax Rates for a Single Individual, 2012 and 2013. -Refer to Table 12-9. Samantha is a single person whose taxable income is $100,000 a year. What is her average tax rate in 2012?

Because taxes distort incentives, they typically result in