Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question.
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1.
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The
flat tax a. | shifts the
burden of taxes to businesses. | b. | would simplify tax filing for most
individuals. | c. | is based on the ability to pay
principle. | d. | shifts the burden of taxes to the
poor. | | |
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2.
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How
do Value Added Taxes promote efficiency? a. | They apply only to wealthy
people. | c. | They are easy to
collect. | b. | They make goods cheaper. | d. | They reduce the cost of business. | | | | |
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3.
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What
is the purpose of a "sin tax"? a. | to discourage certain market
activities | c. | to promote
economic growth | b. | to promote economic efficiency | d. | to discourage economic efficiency | | | | |
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4.
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Which
of the following arguments is used to justify the use of progressive taxes? a. | Progressive
taxes are fair because each taxpayer pays the same amount. | b. | Progressive
taxes are fair because each taxpayer pays the same percentage of income. | c. | Progressive
taxes are fair because those most able to afford taxes pay more. | d. | Progressive
taxes are fair because those who save more money pay less taxes. | | |
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5.
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The
alternative minimum tax a. | is an additional tax above and beyond the base
rate. | b. | allows larger-than-normal depreciation
charges. | c. | allows a reduction in business taxes based on investment in
equipment. | d. | attempts to delete loopholes in the tax code for wealthy
taxpayers. | | |
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6.
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Which
statement correctly describes the Social Security tax? a. | It is a
progressive tax. | c. | It is a
voluntary tax. | b. | It is a payroll tax. | d. | It is an excise tax. | | | | |
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7.
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Which
argument is used to justify the use of sales taxes, a regressive tax? a. | Sales taxes are
fair because taxpayers can avoid the tax by not consuming. | b. | Sales taxes are
fair because taxpayers with little income pay less in taxes. | c. | Sales taxes are
fair because high income taxpayers pay a larger percentage of income. | d. | Sales taxes are
fair because all taxpayers pay the same percentage of income in taxes. | | |
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8.
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Which
is the largest source of local tax revenues? a. | corporate income taxes | c. | sales taxes | b. | property
taxes | d. | personal income
taxes | | | | |
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