Taxes can be used to discourage negative externalities.

True

False

In a regressive tax system,

A.

the effective tax rate is higher in high-income groups.

B.

the effective tax rate is lower in high-income groups.

C.

the average tax rate does not vary with the size of the tax base.

D.

the effective tax rate is the same in all groups.

Which statement about federal mandatory spending is accurate?

	A.	Any public program with strong political support is seen as mandatory.
	B.	Because of its importance for the life of the nation, spending for the military is regarded as mandatory.
	C.	Because appropriation bills must pass for agencies to continue operations, all spending that must go through the full appropriation cycle is considered mandatory.
	D.	Spending for social security benefits is officially mandatory.

The largest expenditure category for state governments is:

	A.	Transportation
	B.	Public welfare
	C.	Higher education
	D.	Public safety

The federal and state payroll taxes are all earmarked.

True

False

Under the current federal individual income tax law, which of the following would be an exclusion from your total income?

	A.	Wages paid by a non-profit organization, like the Red Cross.
	B.	Interest paid on a bond issued by a state government before 1986.
	C.	The value of an old car you received in exchange for painting a house.
	D.	All the above are exclusions.

Under the current federal individual income tax law, which of the following would be an exclusion from your total income?

Which of the following statements is NOT correct?

	A.	All states collect taxes on motor fuel, cigarettes, and alcohol beverages.
	B.	The U.S. federal government does not levy property tax.
	C.	Compared with other industrialized countries, the U.S. has a low tax burden.
	D.	The largest revenue source for local governments is income tax.
	E.	State governments rely heavily on individual income taxes and sales taxes.

The second largest revenue source for federal government is:

	A.	Sales tax
	B.	Property tax
	C.	Corporate income tax
	D.	Payroll tax

The largest expenditure category for local governments is:

	A.	Parks and recreation
	B.	Primary and secondary education
	C.	Transportation
	D.	Public safety

The U.S. federal and state payroll tax rates for Social Security and Medicare fall to zero on pay above some maximum level earned in the year.

True

False

The Congressional Budget Office (CBO) is responsible for external audit of federal departments and agencies.

True

False

The idea that individuals with the same economic capacity should pay the same tax represents:

	A.	Tax adequacy
	B.	Tax progressivity
	C.	Vertical equity
	D.	Horizontal equity

A tax levied on a business will

	A.	reduce the profits of owners.
	B.	reduce the wages of workers.
	C.	increase the prices paid by consumers.
	D.	result in any or all of the above actions depending upon the market conditions the firm faces.

Which of the following is NOT an advantage of income taxation?

	A.	Income is a reasonable measure of individual capacity to bear the cost of government.
	B.	Income taxation entails low administrative cost per dollar collected.
	C.	Income taxation remains constant when the economy contracts.
	D.	Income taxes yield substantial amount of revenue.

The PAYGO budget requirement means:

	A.	that legislation that would increase entitlement spending must be accompanied with an increase in revenue or reduction in spending sufficient to cover the new entitlement spending.
	B.	that no tax reductions are permitted.
	C.	that only programs generating revenues may be proposed for addition to the executive budget.
	D.	that debt refinancing must be approved by Congress.

Many state and local governments are subject to tax and expenditure limitations.

True

False

Tax is a collection of prices charged for services rendered.

True

False

Which of the following is a means-tested entitlement program?

A.

Social Security

B.

Medicare

C.

Unemployment compensation

D.

Medicaid

Which of the following is NOT a difference between budgeting in states as opposed to budgeting in the federal government?

	A.	Many states require a balanced budget each year, but the federal government does not.
	B.	Many states pass a single appropriation/budget law, while the federal government normally passes more than ten such bills (or at least is expected to).
	C.	Many states prepare biennial budgets, while the federal government prepares an annual budget.
	D.	Many states have debt limits, but the federal government does not have such requirement.

Which of the following best describes the Congressional Budget resolution?

	A.	Budget priorities established by Congress
	B.	The reconciliation of committee appropriations
	C.	The formal appropriation of funds to agencies
	D.	The budget submitted by the President to Congress