Podcast
Questions and Answers
Which of the following best describes the economic impact of the federal debt?
Which of the following best describes the economic impact of the federal debt?
- It leads to a transfer of purchasing power and can alter income distribution. (correct)
- It uniformly decreases incentives to work, save, and invest across all income levels.
- It ensures a stable and predictable economic environment due to government borrowing.
- It primarily affects international trade balances without significant domestic impact.
How does the concept of 'incidence of a tax' relate to the elasticity of demand?
How does the concept of 'incidence of a tax' relate to the elasticity of demand?
- The tax incidence always falls entirely on the consumer, regardless of demand elasticity.
- The tax incidence can be shifted more effectively from the supplier to the consumer if the demand curve is inelastic. (correct)
- Inelastic demand means suppliers always bear the full burden of the tax.
- Elastic demand curves allow suppliers to easily shift the tax burden to consumers.
What is the main purpose of indexing tax brackets?
What is the main purpose of indexing tax brackets?
- To simplify the tax code and reduce the need for professional tax assistance.
- To ensure that workers do not pay higher taxes solely due to inflation. (correct)
- To redistribute wealth by adjusting tax burdens based on income inequality.
- To increase government revenue by gradually raising tax rates.
How does a flat tax system differ from a progressive tax system in terms of the 'ability-to-pay' principle?
How does a flat tax system differ from a progressive tax system in terms of the 'ability-to-pay' principle?
What distinguishes federal debt from private debt?
What distinguishes federal debt from private debt?
What is the primary function of 'intergovernmental revenue'?
What is the primary function of 'intergovernmental revenue'?
How do 'appropriations bills' function within the federal budget process?
How do 'appropriations bills' function within the federal budget process?
What is the purpose of the alternative minimum tax (AMT)?
What is the purpose of the alternative minimum tax (AMT)?
How are 'entitlement' programs typically defined?
How are 'entitlement' programs typically defined?
What is the economic impact of 'deficit spending' on the federal government?
What is the economic impact of 'deficit spending' on the federal government?
What role does 'insurance trust funds' play in state finances?
What role does 'insurance trust funds' play in state finances?
How are 'discretionary spending' programs characterized in the federal budget?
How are 'discretionary spending' programs characterized in the federal budget?
What characterizes a 'regressive tax'?
What characterizes a 'regressive tax'?
What is the economic effect of investment tax credits?
What is the economic effect of investment tax credits?
What is the function of a 'tax loophole'?
What is the function of a 'tax loophole'?
Flashcards
Intangible Personal Property
Intangible Personal Property
Intangible personal property includes assets like stocks, bonds, and intellectual property that lack physical substance but represent value.
Sales Tax
Sales Tax
A simple tax levied on most consumer purchases.
Estate Tax
Estate Tax
A tax on the transfer of property when a person dies.
Regressive Tax
Regressive Tax
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Appropriations Bill
Appropriations Bill
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Tax Loophole
Tax Loophole
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Progressive Tax
Progressive Tax
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Entitlement
Entitlement
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Deficit Spending
Deficit Spending
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Federal Debt
Federal Debt
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Entitlement Payment
Entitlement Payment
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FICA
FICA
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Intergovernmental Revenue
Intergovernmental Revenue
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Individual Income Tax
Individual Income Tax
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Individual Income Taxes
Individual Income Taxes
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Study Notes
- Intangible personal property: A bond is an example.
- Sales tax: A simple tax levied on most consumer purchases.
- Estate tax: A tax on the transfer of property when someone dies.
- Regressive tax: A tax that imposes a higher percentage on low incomes than on high incomes.
- Appropriations bill: An act of Congress allowing federal agencies to spend money for specific purposes.
- Tax loophole: An exception or oversight in the tax law allowing some to avoid taxes.
- Progressive tax: Ann earns $10,000, pays $1,000 tax. Jerome earns $60,000, pays $20,000 tax.
- Entitlement: Broad social programs for eligible individuals.
- Deficit spending: Spending in excess of revenues collected.
- Federal debt: Amount borrowed to finance deficit spending.
- Effects of the federal debt:
- Altered income distribution.
- Transferred purchasing power.
- Decreased incentives to work, save, and invest.
- Entitlement payment: Federal money given to a senior citizen as a Social Security payment.
- FICA: Federal tax used to pay for Social Security and Medicare.
- Intergovernmental revenue: Funds collected by one level of government distributed to another for expenditures.
- Largest amount of state expenditures: Higher education.
- Individual income tax: A complex tax on people's earnings.
- Largest source of revenue for the federal government: Individual income taxes.
- Intergovernmental revenues: Generally intended for education and public welfare.
- Local government: Neighborhood associations are not an example of local government.
- Private sector: Part of the economy made up of private individuals and businesses.
- Progressive tax system:
- $1,000 tax on $10,000 taxable income.
- $4,000 on $20,000.
- $20,000 on $60,000.
- Per capita: Means per person.
- Capital gains: Profits from the sale of an asset held for 12 months.
- Discretionary spending: Programs that must receive annual authorization.
- Property tax: Tax on tangible and intangible possessions.
- Public sector spending: Began to rise significantly in the 1940s.
- Investment tax credit: Reduction in business taxes tied to investment in new plants and equipment.
- Differences between federal debt and private debts:
- Federal debt is owed to ourselves, not others.
- The federal government does not have to repay the debt by a specific date.
- The federal government does not lose purchasing power.
- Insurance trust funds: State funds invested for use when people retire, become unemployed, or are injured on the job.
- Texas highway example: Texas pays for maintenance on the state highway linking Tyler, Texas, with Corsicana, Texas.
- The alternative minimum tax ensured that people pay a minimum tax of 20 percent, made it difficult for the very rich to avoid taxes and limited the use of loopholes in the tax code.
- Federal deficit: Leads to borrowing, which adds to the federal debt.
- Significant deficit spending: Federal government began spending in the 1980s.
- Flat tax: Departs from the ability-to-pay principle of taxation.
- Flat tax: Removing behavioral incentives is NOT an advantage.
- Indexing: Government uses indexing to revise tax brackets so workers do not pay higher taxes due to inflation.
- Incidence of a tax: Can be shifted from supplier to consumer if the demand curve is inelastic.
- Largest category of state spending: Intergovernmental expenditures.
- Largest source of revenue for states: Intergovernmental revenues.
- Public sector: Part of the economy made up of federal, state, and local governments.
- Payroll taxes: Deducted directly from paychecks are Medicare and Social Security.
- Tax assessor: The person who assigns value to property for tax purposes.
- Federal tax reform in 1986: Prompted by the tax code favoring the rich and powerful.
- Value added tax: Tax placed on the value that manufacturers add at each stage of production.
- Taxpayer Relief Act of 1997: Did little to benefit people without children or capital gains.
- Government spending: Purchase of goods and services and payments to disadvantaged groups.
- Value added tax (VAT) disadvantage: VAT is invisible to consumers.
- Trust funds: Accounts used to fund types of expenditures.
- Mandatory spending: Welfare programs, Coast Guard expenditures, and Medicare.
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