Taxes and Fiscal Policy Flashcards
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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)

  • Can tax exports
  • Must be for common defense and general welfare (correct)
  • Not for individuals (correct)
  • Prohibits Congress from levying or imposing tax unless divided by population (correct)

    • What are the three types of tax structures?

  • Proportional tax (correct)
  • Progressive tax (correct)
  • Regressive tax (correct)
  • Exempt tax

    • Which of the following are characteristics of a good tax? (Select all that apply)

    <p>Certainty</p> Signup and view all the answers

    Why do employers withhold a set amount of your income?

    <p>So employers can give to the government for taxes</p> Signup and view all the answers

    What is taxable income?

    <p>Total income minus exemptions and deductions</p> Signup and view all the answers

    What does Social Security provide?

    <p>A retirement fund for old people and benefits to families of deceased wage earners</p> Signup and view all the answers

    What is Medicare?

    <p>Helps pay health care for people over 65</p> Signup and view all the answers

    What is a sin tax?

    <p>A tax on items aimed at changing behavior</p> Signup and view all the answers

    What are the three categories of federal spending?

    <p>Discretionary spending</p> Signup and view all the answers

    What is real property?

    <p>Land and buildings</p> Signup and view all the answers

    What is personal property?

    <p>Jewelry and furniture</p> Signup and view all the answers

    What is an operating budget?

    <p>Daily expenses</p> Signup and view all the answers

    What is a capital budget?

    <p>Raising capital expenses</p> Signup and view all the answers

    What is a balanced budget?

    <p>Where revenue equals spending</p> Signup and view all the answers

    What is the part of the executive branch responsible for preparing the president's budget proposal?

    <p>Office of Management and Budget (OMB)</p> Signup and view all the answers

    What are the congressional committees that submit the final bills that authorize specific spending?

    <p>Budget committees in the House and Senate</p> Signup and view all the answers

    What does the federal government use fiscal policy for?

    <p>Growth and GDP</p> Signup and view all the answers

    What are the federal government's two main expansionary policies?

    <p>Not provided</p> Signup and view all the answers

    Under what conditions does the government use expansionary policy?

    <p>Not provided</p> Signup and view all the answers

    What is the overall goal of expansionary policies?

    <p>Not provided</p> Signup and view all the answers

    What are the federal government's two main contractionary policies?

    <p>Not provided</p> Signup and view all the answers

    What conditions might lead the government to use contractionary policy?

    <p>Not provided</p> Signup and view all the answers

    What is the overall goal of contractionary policies?

    <p>Not provided</p> Signup and view all the answers

    What are the kinds of entitlement programs that make it difficult to change spending levels?

    <p>Law programs like Social Security</p> Signup and view all the answers

    Why does it take so long to put fiscal changes into effect?

    <p>The law</p> Signup and view all the answers

    What is John Maynard Keynes' idea of how government should stimulate the economy?

    <p>Government spending boosts the economy</p> Signup and view all the answers

    What is a stable economy?

    <p>Not provided</p> Signup and view all the answers

    What are three tracked economic indicators?

    <p>Not provided</p> Signup and view all the answers

    What is supply-side economics?

    <p>Not provided</p> Signup and view all the answers

    What is the national debt?

    <p>Revenue minus spending</p> Signup and view all the answers

    What is the national deficit?

    <p>Promise to pay</p> Signup and view all the answers

    What is a treasury bill?

    <p>Not provided</p> Signup and view all the answers

    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.

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