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Microeconomics
Tax System
| Question | Answer |
|---|---|
| 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 |
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