Gottheil Quiz: Financing Government: Taxes and Debt

Quiz
Financing Government: Taxes and Debt

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1. Which of the following statements about the opportunity cost of taxation is false?: a. When the government imposes monetary taxes on households and then spends the money on the space program, the opportunity cost of the space program might be private houses, automobiles, and refrigerators forgone.
b. When the government imposes monetary taxes on households and then spends the money on the space program, the opportunity cost of the space program might be Florida vacation trips, medical care, and many college educations forgone.
c. When the government imposes monetary taxes on corporations and then spends the money on the space program, the opportunity cost of the space program might be new factories, skyscraper office buildings, and computer systems forgone.
d. When the government simply commandeers privately owned human, natural, and capital resources to carry out one of its projects, the opportunity cost normally associated with the provision of public goods is avoided.
e. None.

2. A poll tax or head tax is: a. a tax imposed on those who exercise their voting privileges.
b. a tax of a specific absolute amount levied equally on every person.
c. a tax that takes the same percentage of income from every person of household.
d. a tax that takes the same percentage of wealth from every person of household.
e. a tax that is refunded to those who participate in an opinion poll.

3. An income tax structure is said to be progressive when: a. the average tax rate increases as income increases.
b. the absolute amount of tax paid by the rich is greater than that paid by the poor.
c. the tax base is not reduced by exemptions and deductions.
d. taxpayers earning the same income pay the same income tax.
e. the tax rate is the same in each income bracket.

4. Which of the following statements about tax structures is correct?: a. When people earn extra income, if taxes are progressive, they pay a larger dollar amount; if taxes are proportional, they pay the same amount; if taxes are regressive, they pay a smaller amount.
b. Someone earns $10,000 and pays a $1,000 tax; when earning $20,000, he pays a $1,000 tax as well; therefore, the tax structure is proportional.
c. Someone earns $10,000 and pays a $1,000 tax; when earning $20,000, she pays a $2,000 tax; therefore, the tax structure is progressive.
d. All of the above statements are correct.
e. None of the above.

5. Someone pays an income tax of $1,000 at an income of $10,000. What amount of tax must be paid at an income of $20,000 to make the tax progressive, proportional, and regressive, respectively?: a. >$1,000; $1,000; and <$1,000.
b. >$2,000; $1,000; and <$1,000.
c. >$1,000; $2,000; and <$1,000.
d. >$1,000; $1,000; and <$2,000.
e. >$2,000; $2,000; and <$2,000.

6. The corporate income tax in the United States is levied: a. on all dividends distributed to stockholders.
b. on all capital gains made by stockholders.
c. on the net income of corporations before a decision is made about its disposition.
d. on the net income of corporations after dividends are paid out.
e. on corporate undistributed profits minus dividend payments.

7. In the mid-1990s, the percentage of the GDP that was paid by Americans in taxes: a. was about the same as the corresponding percentage in Japan.
b. was about the same as the corresponding percentage in Scandinavia.
c. was about the same as the corresponding percentage in France.
d. was considerably higher than the corresponding percentage in France.
e. was about half the corresponding percentage in the United Kingdom.

8. A sales tax applied to the value of foreign goods entering an economy from abroad is: a. a property tax.
b. a progressive tax.
c. a proportional tax.
d. a regressive tax.
e. a unit tax.

9. Which of the following statements about the U.S. social security tax is correct?: a. Social security taxes are earmarked funds, destined to pay for benefits the system is obligated to pay.
b. The benefits noted in (a) include retirement income, survivors income, income to the disabled, and medical insurance.
c. Social security taxes are collected from both businesses and workers.
d. In any one year, the amount of tax collected may differ from the amount of benefits paid out.
e. All of the preceding statements are correct.

10. U.S. tax reforms in the 1980s: a. reduced the number of tax brackets, but increased the percentage of income taxed.
b. reduced the number of tax brackets and also reduced the percentage of income taxed.
c. reduced the number of tax brackets without touching the percentage of income taxed.
d. increased the number of tax brackets, but decreased the percentage of income taxed.
e. increased the number of tax brackets and also increased the percentage of income taxed.

11. There are three major types of federal taxes in the United States. These include: a. personal income taxes, estate/gift taxes, and excise taxes.
b. personal income taxes, corporate income taxes, and sales taxes.
c. personal income taxes, corporate income taxes, and customs duties.
d. personal income taxes, corporate income taxes, and social security taxes.
e. personal income taxes, corporate income taxes, and property taxes.

12. There are three major types of state and local taxes in the United States. These include: a. personal income taxes, estate/gift taxes, and excise taxes.
b. personal income taxes, corporate income taxes, and sales taxes.
c. personal income taxes, sales/excise/customs taxes, and property taxes.
d. personal income taxes, corporate income taxes, and social security taxes.
e. personal income taxes, corporate income taxes, and property taxes.

13. In the mid-1990s, the corporate income tax provided roughly which percentage of U.S. federal tax receipts?: a. 6 percent.
b. 12 percent.
c. 18 percent.
d. 24 percent.
e. 30 percent.

14. In the mid-1990s, the U.S. federal government's tax revenue amounted to about: a. $1,500 billion.
b. $2,000 billion.
c. $2,500 billion.
d. $3,000 billion.
e. $3,500 billion.

15. In the mid-1990s, federal revenue sharing provided: a. over $200 billion per year for state and local governments.
b. more annual revenue for state and local governments than their income taxes.
c. more annual revenue for state and local governments than their property taxes.
d. all of the above.
e. a mere 2.1% of all state and local government revenues.

16. If the government is unable to finance its spending by taxation, it has an obvious alternative:: a. It can issue new government securities, which reduces the government's deficit.
b. It can issue new government securities, which reduces the public debt.
c. It can issue new government securities, which increases the public debt.
d. It can issue new government securities, which increases the government's deficit.
e. It can do (c) and (d).

17. The national debt is defined as: a. The total amount the federal government owes its creditors at any given moment.
b. The total amount the federal government owes its creditors during any given year.
c. The total amount the federal government has borrowed since 1776.
d. The total amount the federal government owes its creditors at any given moment, minus the money supply.
e. The total amount federal, state, and local governments jointly owe their creditors at any given moment.

18. "The burden of current deficit spending, financed by government borrowing from the public, is borne entirely by the current generation." Which of the following statements supports this argument about U.S. deficit financing?: a. Assuming that the current generation of Americans buys the newly issued government securities, it gives up private goods (cars, houses, and the like) in exchange for public goods (airports, missiles, and the like). There is no gain or loss to Americans as a group. If there is a burden, it is the loss of private goods.
b. Assuming the debt is held by Americans, we owe it to ourselves: In the future, American taxpayers sacrifice money (and the goods that it could have bought) in favor of American bondholders, leaving the future generation as a whole equally well off.
c. Both (a) and (b).
d. If foreigners buy the newly issued securities now, current Americans lose part of their current GDP to foreigners.
e. If foreigners buy the newly issued securities now, future Americans lose part of their future GDP to foreigners.

19. "The burden of current deficit spending, financed by government borrowing from the public, can fall heavily on future generations." Which of the following statements does not support this argument about U.S. deficit financing?: a. Current government borrowing may be used to buy long-lasting public capital goods, such as interstate highway systems, weather satellites, and hospitals.
b. The current borrowing may drive up interest rates and crowd out private capital formation now.
c. Current government borrowing may involve the sale of bonds to foreigners.
d. Future debt repayment may involve repayment to foreigners.
e. All of the above statements fail to support the argument.

20. Which of the following statements about U.S. federal deficit reduction since the 1980s is false?: a. The tax reform acts of 1981 and 1986 actually reduced tax revenues.
b. Government spending in the 1980s continued to rise.
c. The events noted in (a) and (b) created soaring deficits in the 1980s.
d. In the 1990s, tax revenues continued to fall, but defense cuts and welfare reform cut government spending even more.
e. The deficit was cut to zero in 1997.