Final HW Reviews Flashcards
A proportional tax, or flat-rate tax _______.
takes the same percentage of a person’s taxable income in tax regardless of their level of income.
What is the difference between the average tax rate and the marginal tax rate?
The average tax rate uses total income while the marginal tax rate refers to the tax rate of the last dollar earned.
What is a proportional tax system?
Under a proportional system of taxation, taxpayers at all income levels end up paying the same percentage of their income in taxes.
Suppose the federal government replaced the current income tax system with a system that taxed all income at 20%, but the first $20,000 of income was tax-exempt. Such a system would be a ________________ tax system.
Progressive
What is the relationship between tax rates and tax revenues?
Increasing tax rates will initially increase tax revenues. Eventually, an increase in the tax rate will erode the tax base and revenues will decrease.
What is an excise tax?
A tax levied on purchases of a particular good or service. (e.g. cigarettes)
What is the most most important source of revenue for the federal government?
The federal personal income tax accounts for about 43% of all federal revenues and is paid by all American citizens, resident aliens, and most others who earn income in the United States.
What is the structure of the U.S. income tax system?
The U.S. income tax system is a progressive tax system where the marginal tax rate exceeds the average tax rate.
Some economists argue that corporate income taxes are typically not paid by the firm, but by ____.
the stockholders, employees, and customers.
What is stipulated by dynamic tax analysis?
An increase in the tax rate will likely cause a decrease in the tax base.
Assessing taxes by charging a tax rate equal to a fraction of the market price of each unit purchased is known as _____
ad valorem taxation.
How do the taxes that are levied on goods and services affect market prices and quantities?
Part 2
The equilibrium quantity will decrease and the market price will increase by less than the amount of the tax.
An excise tax of 60 cents is levied on a product. As a result of the tax, the price of the product goes from $1 to $1.40. Which of the following is true?
a) The producer pays the entire tax.
b) The consumer pays the entire tax.
c) The producer pays the majority of the tax but not the entire tax.
d) The consumer pays the majority of the tax but not the entire tax.
d) The consumer pays the majority of the tax but not the entire tax.
The federal government has its best opportunity to lower its national debt when it has ______.
A budget surplus
What is the definition of public debt?
The total value of all outstanding government securities.
The accumulation of borrowing by all federal government agencies is referred to as the ____.
Gross Public debt
When considering the gross public debt, one can argue that it is overstated because _____
the federal government owes itself money.
The net public debt is equal to _______.
gross government debt minus all government interagency borrowing.