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Tax System

For the federal government, which category does it get its greatest revenue from? Individual income tax
The federal government spends most of its money on...... Social security
The local and state governments get most of its revenue from _________ Sales tax
Local and state governments spends most of its money on _________ Education
What is a budget surplus? Government revenue is greater than government spending
What is budget deficit? Government spending is greater than government revenue
As the federal government gets more income...... The government's GDP increases as well.
How is the United States in a budget deficit in 2009? Since the elderly population is increasing, the government spends more on Social Security and Medicare.
Why do people want consumption tax better than income tax? It tax on people's spending, instead of income. With this tax, taxpayers (people) can save their money in their accounts.
What is a marginal tax rate? The extra dollar paid on additional dollar of income
What is an average tax rate? Total tax divided by total income
What is an example of an administrative burden? Taxpayer spends both his or her money or time on taxes
The time a taxpayer devotes to complying with the tax laws is an example of __________ Deadweight loss
What is a lump sum tax? Everyone pays the same amount regardless of income.
For a lump sum tax, the marginal tax rate is always _____________ Zero
What is "the ability to pay" principle? Taxes should be placed on people who can handle the burden
What is a vertical equity? The more income you have, the more money you have to pay for tax
What is a horizontal equity? Taxpayers with similar willingness to pay should pay the similar amount
What is progressive tax? People with higher income pays higher fraction than people with lower income.
What is regressive tax? People with lower income pays the higher fraction than people with higher income.
What is proportional tax? People, regardless of income, pays the same fraction of income.
For a corporate tax, where does the tax burden falls on? The people
What is the benefits of a lump-sum tax? -It doesn't distort incentives -Doesn't cause deadweight loss -Low administrative burden
What do some criticize the lump sum tax as unfair? The poor will pay the same amount as the rich.
What determines the deadweight loss? Marginal tax rate
Created by: U0105006



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