Taxation and Spending Overview Quiz

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Questions and Answers

What is the definition of fiscal policy?

Fiscal policy is the government's control over international trade agreements.

Fiscal policy is the process of printing more money to stimulate the economy.

Fiscal policy is the government's regulation of the stock market.

Fiscal policy is how the government adjusts spending and monitors taxes to help the economy. (correct)

What is tax revenue used for?

To finance government officials' personal expenses.

To fund international aid programs.

To support scientific research and development.

To provide defense, road systems, education, and law enforcement. (correct)

What does the United States Constitution spell out regarding taxes?

The process for citizens to avoid paying taxes.

The allocation of tax revenue to different government departments.

The ability to collect taxes. (correct)

The specific tax rates for each state.

What is the purpose of taxation according to the text?

To enable the government to operate and provide essential services. Signup and view all the answers

What does Article 1, Section 8, Clause 1 relate to?

Collection of taxes Signup and view all the answers

What does Tax Base refer to?

Income, property, goods, or services subject to tax Signup and view all the answers

What are the three main tax structures mentioned in the text?

Proportional, progressive, and regressive Signup and view all the answers

What is another name for Proportional Tax?

Flat tax Signup and view all the answers

Which tax structure entails higher tax rates for higher incomes?

Progressive tax Signup and view all the answers

What does Regressive Tax involve?

Decreasing tax rate as income increases Signup and view all the answers

What characteristics do good taxes possess according to the text?

Simplicity, efficiency, certainty, and equity Signup and view all the answers

What does the US government impose taxes on to fund related services?

Specific items Signup and view all the answers

What are Tax Incentives used for?

Encourage or discourage certain behaviors through taxation Signup and view all the answers

How is Federal government revenue collected?

Through income taxes, corporate income taxes, and Social Security & Medicare contributions Signup and view all the answers

On what basis are income taxes collected?

Pay-as-you-earn basis, with withholding and tax returns Signup and view all the answers

What are Corporate income taxes levied on?

Profits after all expenses Signup and view all the answers

What does FICA consist of?

Social Security and Medicare contributions from both employees and employers Signup and view all the answers

What percentage of a worker's income is withheld for Social Security and Medicare?

6.2% Signup and view all the answers

What are unemployment taxes?

Insurance payments to protect workers if they become involuntarily unemployed Signup and view all the answers

What are excise taxes collected on?

The sale of goods or services Signup and view all the answers

When are estate taxes imposed?

On the assets of a deceased person Signup and view all the answers

What is the annual exclusion for gift tax per person?

$14,000 Signup and view all the answers

What are import taxes or tariffs imposed on?

Goods imported into the country Signup and view all the answers

What does mandatory spending include?

Entitlements like Social Security and Medicare Signup and view all the answers

What is discretionary spending for?

Optional expenses like defense Signup and view all the answers

When does deficit spending occur?

When the federal government spends more money than it earns in revenue Signup and view all the answers

What are states' operating budgets for?

Day-to-day expenses Signup and view all the answers

What is the requirement for states' balanced budgets?

To have balanced budgets Signup and view all the answers

Study Notes

Federal and State Taxation and Spending Overview

Federal Insurance Contributions Act (FICA) consists of Social Security and Medicare contributions from both employees and employers.
Approximately 6.2% of a worker's income is withheld for Social Security and Medicare, with employers matching that amount.
Unemployment taxes are insurance payments to protect workers if they become involuntarily unemployed, with restrictions on eligibility and limited benefits.
Excise taxes are collected on the sale of goods or services, similar to sales tax.
Estate taxes are imposed on the assets of a deceased person, with a progressive tax rate for estates over 1.5 million dollars.
Gift tax is levied on money or property given by one living person to another, with an annual exclusion of $14,000 per person.
Import taxes, or tariffs, are imposed on goods imported into the country to make foreign goods more costly and support domestic producers.
Government spending consists of mandatory spending, including entitlements like Social Security and Medicare, and discretionary spending, such as defense and other choice-based expenses.
Mandatory spending is required by law and includes entitlement programs funded by workers' contributions.
Discretionary spending covers optional expenses like defense, agriculture, training, and scientific research.
Deficit spending occurs when the federal government spends more money than it earns in revenue, leading to borrowing and the accumulation of national debt, currently around $18 trillion.
States have operating budgets for day-to-day expenses and capital budgets for major investment expenses, with a requirement to have balanced budgets.

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Description

Test your knowledge of federal and state taxation and spending with this overview quiz. Explore topics such as FICA contributions, unemployment taxes, estate and gift taxes, import tariffs, government spending, mandatory and discretionary spending, deficit spending, and state operating and capital budgets.