Question

 

Fill in answers using key concepts below. Each concept to be used once

• ability to pay principle
• adequacy
• benefits principle
• declining marginal utility
• earned income tax credits
• effective rate
• fee
• horizontally equitable
• progressive
• proportional
• public goods
• refundability
• regressive
• sacrifice doctrine of taxation
• tax burden
• tax equity
• tax expenditures
• tax incidence
• taxation
• vertically equitable

 

1. The ____________________________advises that the costs of government should be allocated in accordance with ability to pay.

2. The ____________________________says that those who benefit from public programs should pay for the provision of services in proportion to the value of benefits received.

3. To be considered a ____________________ in public finance, the amount charged must be proportional, although not necessarily equal, to the benefit received. In addition, the recipient of the service must be able to avoid paying by declining participation.

4. Using fees and charges to finance all services is not fully applicable for services that have _____________________________characteristics, for situations where compensation or redistribution is the goal, or when government provides or subsidizes merit goods.

5. ________________________________ is the only form of government financing that compels payment and is legally enforceable.

6. The fairness goal in taxation has two separable aspects. ______________________ is concerned with the distribution of tax shares across taxpayers so that the higher income pay more tax in dollar terms.

7. ____________________________ considers the economic claim of taxation and avoids imposing an excessive amount of tax on any income group(s) or business sectors and does not target any group for taxation on a basis other than income.

8. The idea that receipts from a tax source should be consistently sufficient to pay for the purposes that the tax is intended to finance is part of the ___________________ goal for high quality tax systems.

9. ___________________________________ are used by the federal government, twenty-five states, New York City, and the District of Columbia to reduce the burden of taxes on the working poor.

10. Some governments’ programs (as described in #9) include _______________________, which means that any credit amount that exceeds taxes due is paid to the taxpayer, thereby supplementing the earnings of the working poor.

11. When two households have a similar ability to pay, under _________________________ tax policies their tax burdens will be similar.

12. ____________________________________ are tax breaks given to qualifying taxpayers that are equivalent to spending because forgoing revenue is the same as acquiring and then spending the revenue.

13. When a household earning $50,000 pays 2% of its income as tax and a household earning $200,000 pays 8% of its income as tax, the rate structure is _______________________.

14. The tax rate structure described in #13 also is ________________________________.

15. A general sales tax on goods and food purchased and cooked at home is __________________________ because low income households spend a higher proportion of the income on goods and food but not much on services, while higher income households spend more on services and food prepared outside the home, and also buy goods. The sum of taxable spending is a smaller share of income for affluent households than for poorer households.

16. The distribution of tax shares across income groups is called _____________________.

17. The percentage of income paid as tax is called the _________________________ of tax.

18. The ____________________________ argues that an equitable distribution of taxes imposes an equivalent sacrifice on taxpayers of various means.

19. The reasoning for using progressive taxation to achieve equal sacrifice is based on the economic theory of ________________________________, which maintains that as income increases, the worth to the recipient of each additional dollar declines.

20. Although some people preferprogressive taxation, because high income taxpayers do in fact pay more tax than lower income taxpayers a ______________________ tax meets the baseline test for fairness under the ability to pay principle.

Answer 1

Filling in the blanks.

1. ability to pay principle

2, benefits principle

3. fee

4. public goods

5. Taxation

6. vertically equitable

7. Tax equity

8. Adequacy

9. earned income tax credits

10. refundability

11. proportional

12. Tax expenditures

13. progressive

14. effective rate

15. regressive

16. tax incidence

17. tax burden

18. sacrifice doctrine of taxation

19. declining marginal utility

20. horizontally equitable