Chapter 12 The Design of the Tax System

171. If revenue from a gasoline tax is used to build and maintain public roads, the gasoline tax may be justified on the basis of

a. the benefits principle.

b. the ability-to-pay principle.

c. vertical equity.

d. horizontal equity.

172. The theory that the wealthy should contribute more to police protection than the poor because they have more to protect is based on

a. the ability-to-pay principle.

b. a consumption tax plan.

c. the benefits principle.

d. property tax assessments.

173. Vertical equity states that taxpayers with a greater ability to pay taxes should

a. contribute a decreasing proportion of each increment in income to taxes.

b. contribute a larger amount.

c. be less subject to administrative burdens of a tax.

d. be less subject to tax distortions that lead to deadweight losses.

174. The claim that all citizens should make an "equal sacrifice" to support government programs is usually associated with

a. the ability-to-pay principle.

b. the benefits principle.

c. efficiency arguments.

d. regressive tax arguments.

175. A tax system based on the ability-to-pay principle claims that all citizens should

a. pay taxes based on the benefits they receive from government services.

b. pay the same amount in taxes.

c. pay taxes on only the income spent.

d. make an equal sacrifice.

176. In order to construct a more complete picture of the economic burden of government across income classes, economists usually

a. include both tax payments as well as transfer payments received.

b. focus only on the tax payments of wealthy tax payers.

c. limit their analysis to taxes based on the ability-to-pay principle.

d. focus their analysis on issues of tax efficiency.

177. If transfer payments are included when evaluating tax burdens then the average tax rate of the poorest quintile of taxpayers would be approximately

a. negative 30 percent.

b. negative 10 percent.

c. positive 1 percent.

d. positive 8 percent.

178. One of the most difficult issues associated with trying to structure a tax policy to satisfy horizontal equity is determining

a. whether or not a taxpayer falls within the highest income quintile.

b. the level of transfer payments made to low-income groups.

c. the source of income for taxpayers.

d. what differences are relevant to a family's ability to pay.

179. The argument that people should pay taxes according to how well each individual can shoulder the burden is called

a. the ability-to-pay principle.

b. the equity principle.

c. the benefits principle.

d. regressive.

180. The U.S. tax law

a. causes the majority of married couples to pay more tax than if they were single.

b. is such that two married couples with the same total income to pay the same amount of tax.

c. treats a married couple as a single tax payer.

d. Both a and c are correct.