Questions and Answers
What gives the government the power to collect taxes?
The Constitution
Which of the following are ways in which the government's power to tax is limited? (Select all that apply)
What are the three types of tax structures?
Which of the following are characteristics of a good tax? (Select all that apply)
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Why do employers withhold a set amount of your income?
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What is taxable income?
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What does Social Security provide?
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What is Medicare?
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What is a sin tax?
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What are the three categories of federal spending?
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What is real property?
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What is personal property?
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What is an operating budget?
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What is a capital budget?
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What is a balanced budget?
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What is the part of the executive branch responsible for preparing the president's budget proposal?
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What are the congressional committees that submit the final bills that authorize specific spending?
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What does the federal government use fiscal policy for?
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What are the federal government's two main expansionary policies?
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Under what conditions does the government use expansionary policy?
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What is the overall goal of expansionary policies?
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What are the federal government's two main contractionary policies?
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What conditions might lead the government to use contractionary policy?
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What is the overall goal of contractionary policies?
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What are the kinds of entitlement programs that make it difficult to change spending levels?
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Why does it take so long to put fiscal changes into effect?
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What is John Maynard Keynes' idea of how government should stimulate the economy?
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What is a stable economy?
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What are three tracked economic indicators?
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What is supply-side economics?
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What is the national debt?
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What is the national deficit?
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What is a treasury bill?
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Study Notes
Government's Power to Tax
- Authority to collect taxes originates from the Constitution.
- Taxation must serve the common defense and general welfare.
- Prohibitions include taxing exports and taxing individuals.
Tax Structures
- Proportional tax: Fixed rate applied to various assets, e.g., property taxes.
- Progressive tax: Increases with income levels, e.g., income tax.
- Regressive tax: Decreases as income rises, e.g., sales tax.
Characteristics of Good Tax
- Simplicity: Tax laws should be straightforward and easy to understand.
- Efficiency: Should require minimal time and resources for collection.
- Certainty: Taxpayers must know the amount owed and due dates.
- Equity: Fairness in taxation, ensuring equal burden among taxpayers.
Withholding Tax
- Employers withhold income tax to remit to the government on behalf of employees.
Taxable Income
- Defined as total income minus exemptions and deductions.
Social Security
- Provides retirement funds for the elderly and benefits for families of deceased wage earners, including disability support.
Medicare
- Offers health care assistance to individuals over the age of 65.
Sin Tax
- Tax imposed on items to discourage certain behaviors.
Federal Spending Categories
- Mandatory Spending: Required by law.
- Discretionary Spending: Allocated based on government priorities.
- Intermittent Spending: Relates to defense funding.
Types of Property
- Real Property: Includes land and buildings.
- Personal Property: Refers to movable items like jewelry and furniture.
Budgets
- Operating Budget: Covers daily operational expenses.
- Capital Budget: Focuses on long-term capital expenditures.
- Balanced Budget: Ensures that revenue equals spending.
Budget Preparation
- The Office of Management and Budget (OMB) prepares the president's budget proposal.
Congressional Committees
- Budget committees in both the House and Senate ultimately submit legislation for specific spending authorizations.
Fiscal Policy Objectives
- Fiscal policy is utilized to promote economic growth and enhance GDP.
Expansionary Policies
- Implemented during economic downturns to stimulate growth and increase employment.
Contractionary Policies
- Enacted to control inflation by reducing government spending or increasing taxes.
Entitlement Programs
- Laws like Social Security create binding commitments, complicating changes in federal spending.
Legislative Delays
- The legislative process can hinder the swift implementation of fiscal changes.
Keynesian Economics
- John Maynard Keynes advocated for government spending to stimulate economic activity during downturns.
Economic Indicators
- Essential metrics tracked to assess economic health include GDP, unemployment rates, and inflation rates.
Supply Side Economics
- Emphasizes reducing taxes and regulation to encourage economic growth.
National Debt vs. Deficit
- National debt results from cumulative revenue shortfalls, while a deficit occurs when the government borrows money to meet spending obligations.
Treasury Bill
- Short-term government securities issued to finance national debt.
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Description
Test your knowledge on the principles of taxation and fiscal policy with these flashcards. Covering constitutional powers, limitations on taxation, and different tax structures, this quiz will help solidify your understanding of government taxation processes.
