ECON chapter 9
1. __________ affect the factors of
production & therefore, resource
allocation.
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2. A tax placed on a good at the factory
raises production _____; if demand stays
the same, the __________ price goes up.
3. Taxes affect the economy by
encouraging or discouraging certain
activities.
4. A _________ is a high-percentage tax
that raises revenue while reducing
consumption of a socially undesirable
product. Example?
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5. Taxes affect productivity & economic
growth by changing the ___________ to
save, invest, & work.
6. The ____________ of a tax is the final
burden of the tax; it is easier for a
producer to shift the incidence of a tax to
the ___________ if the demand is
__________; the more the _________
the demand, the more likely the
________ will absorb a greater portion of
the tax.
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7. Taxes are effective when they are
___________, simple, & _________.
Criterion 1 – equity or fairness; fairness
is subjective, but taxes are considered
fairer if they have fewer loopholes
Criterion 2 – simplicity; tax laws should
be easy to understand
Criterion 3 – efficiency; which means it
is easy to administer & is successful at
generating revenue
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8. The _______________ states that
those who benefit from gov’t goods and
services should pay in proportion to the
amount of benefits they receive.
9. The limitations of this principle are that
many gov’t services provide the greatest
benefit to those who can least afford
them & that benefits are hard to
measure.
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10. The _____________ principle is the
belief that people should be taxed
according to their ability to pay.
11. The ability-to-pay principle is based
on two ideas; that societies cannot always
measure the benefits derived from gov’t
spending, and people with ___________
suffer less discomfort in paying taxes that
people with lower incomes.
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12. A ______________ tax is one that
imposes the same percentage on
everyone, regardless of income.
13. A _______________ tax is one that
imposes a higher percentage of tax on
persons with higher incomes.
14. A ________________ tax is one that
imposes a higher percentage on low
incomes than on high incomes.
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1. The federal government collects
about __% of its revenue from the
individual income tax.
2. Taxes are typically withheld from
individual’s ___________, with
employers sending the taxes
directly to the _____.
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3. Individuals file a tax return on or
before ________ each year; if taxes
withheld are more than the taxes owed,
the individual receives a _______; if not,
the individual makes a __________ of the
tax balance.
4. The individual income tax is a
______________ tax because individuals
earning higher incomes pay higher tax
rates.
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5. The _________________
____________ Act (FICA) tax pays
for ____________ and _________.
6. FICA is the second largest source
of government revenue.
7. The FICA tax is a __________
tax. Social Security is partly a
proportional tax and partly a
regressive tax.
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8. ____________ pay a tax on their
profits because they are considered
legal entities.
9. Corporate tax is the third largest
source of gov’t revenue.
10. The ________ tax is a
regressive tax on the manufacture
or sale of selected items.
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11. The __________ tax deals with
the transfer of property when a
person dies.
12. The ______ tax is placed on
large donations of money or wealth
and is paid by the donator.
13. A _____________ is a charge
levied on goods brought in from
other countries.
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14. The Reagan administration
implemented user fees for the use
of goods or services.
15. User fees are an example of
taxation based on the benefit
principle.
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1. Intergovernmental revenues are funds
collected by one level of gov’t that are
distributed to another level.
2. Intergovernmental revenues are the
____________ of revenues for state &
local governments; about ____ of all
state revenues.
3. A __________ tax is one levied on
consumer purchases for nearly all
products.
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4. Employee _____________
contributions make up the ____ largest
source of income.
5. __________ income tax revenues
make up the ______ largest source of
income.
6. Other sources of revenue include
interest earnings on surplus funds; fees
from state owned colleges, universities,
and schools; corporate income taxes, &
hospital fees.
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7. Intergovernmental revenues are
generally _________ for education
& public welfare; they make up the
largest source of local gov’t revenue
8. ___________ taxes are levied on
tangible and intangible products;
they make up the second largest
source.
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9. Local governments receive revenues
from gov’t owned public utilities and state
owned liquor stores.
10. Some towns & cities have a _____
tax, which is collected along with the
state’s sales tax.
11. Other sources of local income include
hospital fees, personal taxes, & public
__________.
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12. Looking at your payroll
withholding statement will help you
identify many of your state & local
government’s revenue sources.
13. Additional deductions can be
added to payroll for retirement
contributions, purchases savings
bonds, or credit unions.
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1. The _________________ Act of
1981 reduced taxes for individuals
& businesses.
2. During the 1980s, most
Americans believed that the tax
code favored the rich.
3. In _______ Congressional tax
reform limited the tax brackets to
15% to 28%.
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4. The Omnibus Budget Reconciliation Act
of _____ added two higher income tax
brackets, but its goal was more to assist
in balancing the federal budget than in
adjusting rates for income levels.
5. In 1997, the ___________ Act was
passed giving tax credits for children &
educational expenses, & reduced rates to
people with capital gains from long-term
investments in stocks and bonds.
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6. In 2003, to offset the recession, the
_________ administration & Congress
made the 2001 tax cuts effective
immediately, reducing the top four tax
brackets, the upper limit for lower-income
taxpayers, and capital gains tax.
7. A _____________ tax (VAT) places a
tax on the value that manufactures add to
a good at each state of production.
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8. Advantages to the VAT: the tax is
levied on the total amount of sales less
the cost of inputs; the incidence of the
tax is widely spread among the
manufactures involved; it is easy to
collect; it encourages people to save.
9. Disadvantages of the VAT: taxpayers
are unlikely to notice increases; & it
would compete with state sales taxes.
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10. A ____ tax is a proportional tax
on individual income after a
specified income threshold has been
reached.
11. Unexpected economic
slowdowns, such as the 2001
recession, can cause
______________ to fall & budget
deficits to occur.