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Questions and Answers
What is a characteristic of a progressive tax system?
Which of the following best describes an excise tax?
What is the primary purpose of 'sin' taxes?
What does FICA stand for, and what programs does it fund?
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What distinguishes a regressive tax system from other tax systems?
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What is the definition of the incidence of tax?
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Which tax system has been primarily adopted by the US government?
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What is a key distinction between operating budgets and capital budgets?
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What characteristic of money ensures that it can be easily exchanged for goods and services?
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Which feature of money allows it to be broken down into smaller parts without losing value?
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Why is portability an essential characteristic of money?
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How does uniformity in money aid in economic transactions?
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What is a consequence of money being fungible?
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Study Notes
Taxes and Revenue
- Tax: A mandatory payment to a government.
- Revenue: The total income received by a government (from taxes and other sources).
- Progressive Tax System: Higher earners pay a larger percentage of their income in taxes.
- Proportional Tax System: All earners pay the same percentage of their income in taxes.
- Regressive Tax System: Lower earners pay a larger percentage of their income in taxes.
- U.S. Tax System: Primarily progressive, with some regressive elements.
Types of Taxes
- Income Tax: Tax on earned income (wages, salaries, etc.).
- Property Tax: Tax on the value of real estate (land and buildings).
- Incidence of Tax: Who ultimately bears the burden of a tax (not necessarily the payer).
- Excise Tax: Tax on specific goods or services (e.g., gasoline, alcohol, tobacco).
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FICA (Federal Insurance Contributions Act): Funds Social Security and Medicare.
- Social Security: Primarily pays for retirement, disability, and survivor benefits for retirees and their dependents.
- Medicare: Primarily provides health insurance for senior citizens and some individuals with disabilities.
- Tariff: A tax on imported goods; often used to protect domestic industries.
- "Sin" Taxes: Taxes on goods deemed harmful (e.g., alcohol, tobacco); designed to discourage consumption and raise revenue.
Federal Revenue (Excel Project Data)
- Total Federal Revenue: $2,105,000,000,000
- Largest Revenue Sources: Income tax and Social Security taxes. (Specific percentages require calculation using provided data).
State and Local Taxes
- Operating Budget: Funds day-to-day government operations (salaries, supplies, etc.).
- Capital Budget: Funds long-term investments (infrastructure projects, buildings).
- Balanced Budget: Government revenues equal government expenditures.
- State Operating Budget Expenses: Examples include education, public safety, and healthcare.
Durability
- Money must resist wear and tear from repeated use.
Portability
- Money should be easily carried due to its small size and light weight (e.g., paper money and coins).
Divisibility
- Money must be easily divided into smaller units.
Uniformity
- Money needs consistent and accurate measurement for counting.
Fungibility
- Each unit of money is identical to others of the same denomination.
Acceptability
- All economic participants must accept money in exchange for goods and services.
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Description
This quiz explores the fundamentals of taxes and revenue generation systems. It covers various types of taxes, including income, property, and excise taxes, as well as progressive, proportional, and regressive tax systems. Test your knowledge of the U.S. tax system and its implications.
