Question

Which is necessarily true if the government were to replace a progressive income tax system with a proportional one?

	1) Lower income groups would pay less tax
	2) Higher income groups would pay more tax
	3) All tax burdens would be exactly the same
	4) The distribution of after-tax income would become less equal

The Federal payroll (Social Security) tax:

	1) Increases the progressivity of the Federal tax system
	2) Reduces some of the progressivity of the Federal tax system
	3) Offsets some of the regressivity of the Federal tax system
	4) Decreases the proportionality of the Federal tax system

The Federal tax system is:

	1) Proportional while state and local tax structures are largely progressive
	2) Progressive while state and local tax structures are largely regressive
	3) Regressive while state and local tax structures are largely proportional
	4) Regressive while state and local tax structures are largely progressive

If the tax on gasoline is increased, gas stations are most likely to pass most of this increase to the consumer if the demand is:

	1) Unitary elastic
	2) Very inelastic
	3) Slightly elastic
	4) Perfectly elastic

The incidence of taxation refers to:

	1) Who in society actually pays the tax
	2) The structure of basic income tax rates
	3) Whether taxes are progressive or regressive
	4) Whether or not the benefits-received principle applies

A person whose income has increased from $10,000 to $20,000 finds that her Federal marginal tax rate has increased from 18 percent to 22 percent. This is an example of a:

	1) Regressive tax
	2) Progressive tax
	3) Proportional tax
	4) Fair tax

The benefits-received principle of taxation is:

	1) The basis for the gasoline tax
	2) Easy to apply because benefits received are conveniently measurable
	3) Applied in income-redistribution programs
	4) The principle behind the income tax system

Which of the following is the largest expenditure item of state governments?

	1) Education
	2) Highways
	3) Public welfare
	4) Health and hospitals

Answer 1

Which is necessarily true if the government were to replace a progressive income tax system with a proportional one?

4)	The distribution of after-tax income would become less equal

This is because of the utility loss of poor people will be more compare to richer ones.

The Federal payroll (Social Security) tax:

1)	Increases the progressivity of the Federal tax system

This is because it hits the richer people more.

The Federal tax system is:

2) Progressive while state and local tax structures are largely regressive

This is on the basis of the Federal reserve FAQs. Their analysis is available there.

If the tax on gasoline is increased, gas stations are most likely to pass most of this increase to the consumer if the demand is:

2)	Very inelastic

Because in a very inelastic demand curve the consumer surplus is minimum and passing is easy.

The incidence of taxation refers to:

1) Who in society actually pays the tax

This is because first the impact of the tax is observed but the incidence is where at last it is paid.

A person whose income has increased from $10,000 to $20,000 finds that her Federal marginal tax rate has increased from 18 per cent to 22 per cent. This is an example of a:

2)	Progressive tax

Because of tax increases with the increase in income.

The benefits-received principle of taxation is:

2)	Easy to apply because benefits received are conveniently measurable

Because benefits are generally given by the government and it has the account for that.

Which of the following is the largest expenditure item of state governments?

Education

The data suggests so.