Question 1

Tax incidence is:

Accepted Answer

A)   the study of who bears the burden of taxes
B)   the amount of tax that each taxpayer must pay
C)   the amount by which a tax will alter people's behaviour
D)   the effect of a taxE) B) and C)
F) A) and B)

Question 2

Lump-sum taxes are equitable but not efficient.

Accepted Answer

A) True 
 B)False

Question 3

One of the benefits from switching taxation away from income towards consumption is that:

Accepted Answer

A)   it will necessarily increase tax revenues
B)   it is always administratively simpler
C)   it distorts incentives to earn income
D)   it eliminates disincentives to saveE) None of the above
F) C) and D)

Question 4

The benefits principle of taxation can be used to argue that wealthy citizens should pay higher taxes than poorer ones on the basis that:

Accepted Answer

A)   police services are more frequently used in poor neighbourhoods
B)   the wealthy benefit more from services provided by government than the poor
C)   the poor are more active in political processes
D)   there is more crime in rich neighbourhoods than poor neighbourhoodsE) None of the above
F) A) and D)

Question 5

If your income is $80 000 and you paid $500 car registration, your:

Accepted Answer

A)   lump-sum tax is $500
B)   proportional tax $500
C)   average tax rate is six per cent
D)   marginal tax rate is six per centE) B) and C)
F) C) and D)

Question 6

When tax laws give preferential treatment to specific types of behaviour, it is called:

Accepted Answer

A)   tax evasion
B)   a political pay-off
C)   a tax loophole
D)   compensation for the benefit of societyE) A) and B)
F) A) and C)

Question 7

Company income is taxed three times: first when the corporation earns profits; second when the bondholders pay tax on interest income; and third when individuals pay tax on company dividends.

Accepted Answer

A) True 
 B)False

Question 8

Attempts by taxpayers to illegally reduce their tax liability are termed:

Accepted Answer

A)   tax avoidance
B)   tax evasion
C)   a tax-return compensation plan
D)   activities outside the intent of tax lawE) A) and B)
F) A) and C)

Question 9

The marginal tax rate is:

Accepted Answer

A)   how much every dollar earned is taxed
B)   how much every dollar earned is taxed, on average
C)   how much the first $18 200 earned is taxed
D)   how much every extra dollar earned is taxedE) A) and B)
F) B) and C)

Question 10

Taxes on the wealthy that are used exclusively for anti-poverty programs may be justified on the benefits principle if:

Accepted Answer

A)   the wealthy place a greater dollar value on anti-poverty programs than other classes of taxpayers
B)   anti-poverty programs can be considered public goods
C)   wealthy taxpayers received some personal benefit from anti-poverty programs
D)   all of the above are trueE) None of the above
F) A) and B)

Question 11

Complex tax laws result from political processes.

Accepted Answer

A) True 
 B)False

Question 12

Some welfare groups argue that the GST places a disproportionate tax burden on lower income earners.

Accepted Answer

A) True 
 B)False

Question 13

Suppose the government imposes a tax of 10 per cent on the first $20 000 of income, 20 % on income from $20 000 to $50 000, and 30 per cent on income from $50 000 or more. Amy has an income of $32 000 and Lee has an income of $60 000. What are the tax liabilities, the marginal tax rate and the average tax rate for Amy and Lee?

Accepted Answer

Amy has a tax liability of $4400, her ma...

Question 14

Explain why the New Zealand 15% GST is viewed as regressive.

Accepted Answer

GST is a flat tax that affects everyone ...

Question 15

Vertical equity states that taxpayers with a greater ability to pay taxes should contribute a decreasing proportion of each increment in income to taxes.

Accepted Answer

A) True 
 B)False

Question 16

The indirect effects from taxation would include:

Accepted Answer

A)   the effect of the tax on equilibrium prices
B)   the flypaper effect
C)   the inability of buyers to change their buying habits in order to escape from paying a tax
D)   all of the aboveE) A) and C)
F) B) and D)

Question 17

When the government levies a tax on a company:

Accepted Answer

A)   all the burden of the tax ultimately falls on owners
B)   it is meeting all of the requirements for vertical equity
C)   the company is more like a tax collector than a taxpayer
D)   there are very few distortions to individual incentivesE) A) and B)
F) All of the above

Question 18

Policymakers consider two main objectives when designing a taxation system:

Accepted Answer

A)   revenue and debt reduction
B)   equity and efficiency
C)   revenue and expenditures
D)   expenditures and efficiencyE) A) and B)
F) A) and C)

Question 19

After a tax is imposed some people change their behaviour. These changes cause a deadweight loss to be generated.

Accepted Answer

A) True 
 B)False

Question 20

A lump-sum tax imposes a minimal administrative burden on taxpayers because:

Accepted Answer

A)   everyone can easily compute the amount of tax they owe
B)   there is no benefit to hiring an accountant to do your taxes
C)   everyone owes the same amount of tax, regardless of earnings
D)   all of the above are trueE) None of the above
F) A) and B)

Exam 12: The Design of the Tax System

The marginal tax rate is:

Correct Answer
verified

Tax incidence is:

Correct Answer
verified

The benefits principle of taxation can be used to argue that wealthy citizens should pay higher taxes than poorer ones on the basis that:

Correct Answer
verified

Correct Answer
verified
Amy has a tax liability of $4400, her ma...
View Answer

Lump-sum taxes are equitable but not efficient.

Correct Answer
verified

Vertical equity states that taxpayers with a greater ability to pay taxes should contribute a decreasing proportion of each increment in income to taxes.

Correct Answer
verified

When the government levies a tax on a company:

Correct Answer
verified

Attempts by taxpayers to illegally reduce their tax liability are termed:

Correct Answer
verified

A lump-sum tax imposes a minimal administrative burden on taxpayers because:

Correct Answer
verified

After a tax is imposed some people change their behaviour. These changes cause a deadweight loss to be generated.

Correct Answer
verified

Explain why the New Zealand 15% GST is viewed as regressive.

Correct Answer
verified
GST is a flat tax that affects everyone ...
View Answer

Policymakers consider two main objectives when designing a taxation system:

Correct Answer
verified

Taxes on the wealthy that are used exclusively for anti-poverty programs may be justified on the benefits principle if:

Correct Answer
verified

When tax laws give preferential treatment to specific types of behaviour, it is called:

Correct Answer
verified

Company income is taxed three times: first when the corporation earns profits; second when the bondholders pay tax on interest income; and third when individuals pay tax on company dividends.

Correct Answer
verified

One of the benefits from switching taxation away from income towards consumption is that:

Correct Answer
verified

The indirect effects from taxation would include:

Correct Answer
verified

Some welfare groups argue that the GST places a disproportionate tax burden on lower income earners.

Correct Answer
verified

Complex tax laws result from political processes.

Correct Answer
verified

If your income is $80 000 and you paid $500 car registration, your:

Correct Answer
verified

Exam 12: The Design of the Tax System

The marginal tax rate is:

Correct AnswerverifiedShow Answer

Tax incidence is:

Correct AnswerverifiedShow Answer

The benefits principle of taxation can be used to argue that wealthy citizens should pay higher taxes than poorer ones on the basis that:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedAmy has a tax liability of $4400, her ma...View AnswerShow Answer

Lump-sum taxes are equitable but not efficient.

Correct AnswerverifiedShow Answer

Vertical equity states that taxpayers with a greater ability to pay taxes should contribute a decreasing proportion of each increment in income to taxes.

Correct AnswerverifiedShow Answer

When the government levies a tax on a company:

Correct AnswerverifiedShow Answer

Attempts by taxpayers to illegally reduce their tax liability are termed:

Correct AnswerverifiedShow Answer

A lump-sum tax imposes a minimal administrative burden on taxpayers because:

Correct AnswerverifiedShow Answer

After a tax is imposed some people change their behaviour. These changes cause a deadweight loss to be generated.

Correct AnswerverifiedShow Answer

Explain why the New Zealand 15% GST is viewed as regressive.

Correct AnswerverifiedGST is a flat tax that affects everyone ...View AnswerShow Answer

Policymakers consider two main objectives when designing a taxation system:

Correct AnswerverifiedShow Answer

Taxes on the wealthy that are used exclusively for anti-poverty programs may be justified on the benefits principle if:

Correct AnswerverifiedShow Answer

When tax laws give preferential treatment to specific types of behaviour, it is called:

Correct AnswerverifiedShow Answer

Company income is taxed three times: first when the corporation earns profits; second when the bondholders pay tax on interest income; and third when individuals pay tax on company dividends.

Correct AnswerverifiedShow Answer

One of the benefits from switching taxation away from income towards consumption is that:

Correct AnswerverifiedShow Answer

The indirect effects from taxation would include:

Correct AnswerverifiedShow Answer

Some welfare groups argue that the GST places a disproportionate tax burden on lower income earners.

Correct AnswerverifiedShow Answer

Complex tax laws result from political processes.

Correct AnswerverifiedShow Answer

If your income is $80 000 and you paid $500 car registration, your:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Amy has a tax liability of $4400, her ma...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
GST is a flat tax that affects everyone ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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