The document discusses Texas's tax system and state budgeting process. It covers topics like the reliance on regressive sales taxes, lack of a state income tax, and dual budgeting system. Key aspects of the tax system include an overreliance on sales taxes that fall disproportionately on low- and middle-income individuals, revenue volatility due to economic downturns, and the general sales tax accounting for 56% of revenues. The dual budgeting process involves both the legislative and executive branches preparing separate budget documents, with the governor and Legislative Budget Board playing major roles in budget formulation.

1.  Question 1
0 out of 4 points
The two most significant problems with the tax system in Texas are _____.
Selected Answer: e.
all of these
Answers: a.
fairness and the lack of elasticity
b.
its focus on personal and corporate income taxes
c.
its overreliance on state property taxes and borrowing
d.
its overtaxing of businesses both large and small
e.
all of these
 Question 2
0 out of 4 points
Why are revenue shortfalls such a problem for the Texas tax system?
Selected
Answer:
c.
The system relies heavily on spending by low- and middle-class individuals.
Answers: a.
The state relies too much on sales taxes.
b.
When the economy is weak, people stop buying and thus stop paying sales
taxes.
c.
The system relies heavily on spending by low- and middle-class individuals.
d.
All of these are reasons for revenue shortfalls.
e.
None of these is a reason for revenue shortfalls.
 Question 3
4 out of 4 points
The overall tax system in Texas _____.
Selected
Answer:
d.
falls disproportionately on poor and middle income earners
Answers: a.
relies on pay-as-you-go taxes that are equitable to all groups
b.

2. is financed by voluntary taxes such as sin taxes on optional items like cigarettes
and the Texas Lottery
c.
falls more heavily on the middle class than either the rich or poor
d.
falls disproportionately on poor and middle income earners
e.
falls much more heavily on the rich than on the poor
 Question 4
0 out of 4 points
Which characterization of the Texas system of taxation is not accurate?
Selected
Answer:
d.
Texas overrelies on sales taxes.
Answers: a.
Texas tax policy reflects its individualistic and traditionalistic political cultures.
b.
The business franchise (margins) tax in Texas is a significant burden on the
business community and has raised far more money for the state than expected.
c.
Texas taxes place a heavier burden on low- and middle-income families than on
businesses or the wealthy.
d.
Texas overrelies on sales taxes.
e.
Texas has no personal income tax and no true corporate income tax.
 Question 5
4 out of 4 points
Which statement about progressive taxation is not true?
Selected
Answer:
b.
Texas has a highly progressive tax system.
Answers: a.
Progressive taxation is also known as an "ability to pay" tax.
b.
Texas has a highly progressive tax system.
c.
Progressive taxation is where the rate of taxation goes up as income goes up.
d.
Texas has passed a constitutional amendment making a progressive income tax
very difficult to create.
e.
The federal income tax is an example of progressive taxation.

3.  Question 6
4 out of 4 points
Which of these is an example of a progressive tax?
Selected Answer: a.
federal income tax
Answers: a.
federal income tax
b.
general sales tax
c.
cigarette tax
d.
oil and gas production tax
e.
motor fuels tax
 Question 7
4 out of 4 points
Which statement about Texas's tax system is true?
Selected
Answer:
e.
All of these statements are true.
Answers: a.
The state relies on sales taxes rather than personal income taxes.
b.
Poorer residents pay a higher percentage of their income in taxes than
wealthier residents do.
c.
Sales taxes account for a larger percentage of state revenues than do business
taxes.
d.
State taxes are primarily regressive in nature.
e.
All of these statements are true.
 Question 8
4 out of 4 points
Which of these accounts for 56 percent of state tax revenues?
Selected Answer: a.
general sales tax
Answers: a.
general sales tax

4. b.
business franchise tax
c.
motor fuels tax
d.
state property taxes
e.
income taxes
 Question 9
0 out of 4 points
When your classmate Paula bought a new dress, she paid 8.25 percent in sales taxes. Where
does that tax money go?
Selected
Answer:
c.
The state of Texas gets 6.25 percent, city governments collect 1 percent, and
mass transit districts or county economic development districts receive 1 percent.
Answers: a.
It is split between school districts and the state of Texas.
b.
It is split between the state and federal governments.
c.
The state of Texas gets 6.25 percent, city governments collect 1 percent, and
mass transit districts or county economic development districts receive 1 percent.
d.
All 8.25 percent goes to the state of Texas.
e.
It is split between the state and county governments, with the state getting 6.25
percent and the counties getting 2 percent.
 Question 10
4 out of 4 points
Which type of tax does Texas not have?
Selected Answer: a.
personal income tax
Answers: a.
personal income tax
b.
severance tax
c.
motor fuels tax
d.
inheritance tax

5. e.
general sales tax
 Question 11
4 out of 4 points
The best example of Texas’s reliance on regressive taxes is the _____.
Selected Answer: d.
general retail sales tax
Answers: a.
inheritance tax
b.
corporate income tax
c.
property tax
d.
general retail sales tax
e.
income tax
 Question 12
4 out of 4 points
Which of these is exempt from the general sales tax in Texas?
Selected Answer: a.
most food sold in grocery stores
Answers: a.
most food sold in grocery stores
b.
books
c.
food sold in restaurants
d.
clothing
e.
over-the-counter drugs
 Question 13
0 out of 4 points
In Texas, property taxes _____.
Selected
Answer:
e.
have been collected by the state government since 1982 and make up a
significant percentage of state revenues

6. Answers: a.
have been collected by the state government since 1982
b.
are used to fund local governments, not the state government
c.
do not exist
d.
make up a significant percentage of state revenues
e.
have been collected by the state government since 1982 and make up a
significant percentage of state revenues
 Question 14
4 out of 4 points
The taxes Texas levies on specific items like tobacco products, alcoholic beverages, and
gasoline are known as _____ taxes.
Selected Answer: c.
excise or selective sales
Answers: a.
corporation franchise
b.
severance
c.
excise or selective sales
d.
general sales
e.
gross receipts
 Question 15
4 out of 4 points
A _____ tax is a tax levied on the removal of natural resources (especially oil and gas) from the
earth.
Selected Answer: a.
severance
Answers: a.
severance
b.
corporate income
c.
franchise

7. d.
motor fuels
e.
property
 Question 16
0 out of 4 points
Most of the money generated by the motor fuels (gas and diesel fuel) tax in Texas _____.
Selected Answer: e.
all of these
Answers: a.
is paid by businesses
b.
funds health and human services
c.
produces an exact ratio of benefits paid and benefits received
d.
is spent on maintaining and building highways and roads
e.
all of these
 Question 17
4 out of 4 points
Which statement is an argument in support of a state income tax for Texas?
Selected
Answer:
b.
Income taxes would create a more progressive tax system.
Answers: a.
Texas does fine except when the economy is in an economic slump.
b.
Income taxes would create a more progressive tax system.
c.
A state income tax would require a constitutional amendment, which would be
unlikely.
d.
Our current tax system attracts new businesses to Texas that might not come if
we had a state income tax.
e.
It is fair for poor people to pay a higher percentage of their income in taxes
because they demand more government services.
 Question 18
0 out of 4 points

8. Which strategy has the state of Texas pursued to find adequate revenue sources?
Selected
Answer:
a.
performance evaluation and management such as the Texas Performance
Review
Answers: a.
performance evaluation and management such as the Texas Performance
Review
b.
privatizing services by contracting them out to businesses
c.
passing along costs to private citizens
d.
changing the revenue structure
e.
all of these
 Question 19
0 out of 4 points
When the state of Texas contracts with a private company to build and run prisons in Texas, this
is an example of _____.
Selected Answer: a.
privatization
Answers: a.
privatization
b.
competition among governments
c.
changing the state's tax structure
d.
performance review
e.
moralistic culture
 Question 20
4 out of 4 points
In order for tax restructuring to occur in Texas, _____.
Selected
Answer:
a.
all of these
Answers: a.
all of these
b.

9. businesses would have to accept an activity tax like a corporate income tax
c.
the public would have to be more accepting of a state income tax
d.
state politics and attitudes would have to change
e.
regular revenue shortfalls would have to end and taxes would have to be more
elastic
 Question 21
4 out of 4 points
The two state agencies that play a major role in the initial formulation of the budget are the
Budget, Planning, and Policy Division and the _____.
Selected Answer: b.
Legislative Budget Board
Answers: a.
Legislative Reference Service
b.
Legislative Budget Board
c.
General Accounting Office
d.
Comptroller’s Office
e.
Treasurer’s Office
 Question 22
0 out of 4 points
Which statement about the dual-budgeting system in Texas is not true?
Selected
Answer:
c.
Both the legislative and executive branches prepare separate budget
documents.
Answers: a.
It tends to take an incremental approach.
b.
It outlines state expenditures for a two-year period.
c.
Both the legislative and executive branches prepare separate budget
documents.
d.
"Dual budgeting" refers to the budget committees of both the House and the
Senate.

10. e.
It is is wasteful but allows different political perspectives to be heard.
 Question 23
4 out of 4 points
In the authorization and appropriations stage of budgeting, _____.
Selected
Answer:
e.
all of these
Answers: a.
there is input from the governor's staff, agency representatives, interest groups,
and private citizens
b.
the budget reflects the power of interest groups
c.
committee members bargain, compromise, and trade votes
d.
past campaign contributions begin to pay off in budgeting decisions
e.
all of these
 Question 24
4 out of 4 points
Which of these is not a source of power for the governor when dealing with the budget?
Selected Answer: d.
the ability to restore funding that the legislature has cut
Answers: a.
the line-item veto
b.
the preparation of his or her own budget separate from that of the LBB
c.
the election of legislators who share his or her budget philosophy
d.
the ability to restore funding that the legislature has cut
e.
none of these, since all are sources of budget power for the governor
 Question 25
0 out of 4 points
In budget discussions, a source of power for the comptroller is _____.
Selected
Answer:
d.
his or her participation in LBB budget choices about expenditures
Answers: a.

11. his or her power to line-item veto the budget
b.
the biennial session
c.
that the comptroller must certify that expected revenues are sufficient to fund
expenditures
d.
his or her participation in LBB budget choices about expenditures
e.
all of these