Question

1. which of the following describes the original design intent of the federal personal income tax

a) regressive tax

b) proportional tax

c) poll tax

d) progressive tax

e) payroll tax

2. bobby pays a tax of $5000 on her income of $50,000 while brad pays a tax of $700 on his income of $18,000

a) regressive

b) a flat tax

c) proportional

d) progressive

3.an example of progressive tax is

a) the excise tax of cugarettes

b) the federal tax on gasoline

c) the federal personal income tax

d) all of these

4. the personal cost of obtaining information about persons running for office is sometimes perceived larger than the personal benefit. this describes which if the following reasons behind government failures

a) rational voter ignorance

b) choice

c) irrational voter ignorance

d) collective interest

Answer 1

A regressive tax is when with an increase in income, the tax decreases, while in case of a progressive tax, the taxes are higher when there is an increase in the income. A flat tax is when the amount of tax is same or flat no matter how much is the income., while the proportional tax is when a constant rate of tax is paid by everyone no matter how large or small is the income.

1. The first personal income tax was imposed in 1861, which was 3% for everyone earning an income of over $800. Since it was a constant rate for everyone, thus it was a proportional tax. (b)
2. Here since with low income of $18,000 lower taxes of $700 are paid while higher taxes of $5000 are paid with higher income of $50,000, thus it is an example of a regressive tax.
3. Excise tax on cigarettes is flat $1.01 per packet, which is a flat tax. Federal tax on gasoline is also a constant rate of 18.4 cents per gallons. The federal personal income tax, however, has different slabs with the rates higher for those earning more, thus it is a progressive tax. (c)
4. Rational voter ignorance is refraining from obtaining information when the cost of acquiring it is larger than the benefits received. Irrational voter ignorance, on the other hand, is reverse of it. Collective interest is when everyone wants to do the same or when everyone, in this case, would choose to acquire knowledge; choice, however, is subjective and based on the information available with the voters. (a)