This document contains a chapter from an economics textbook on social security and healthcare. It includes 20 true/false questions and 20 multiple choice questions testing knowledge of key concepts related to social security, Medicare, Medicaid, national health insurance systems, and issues around third-party payment for healthcare. Some of the main topics covered include how social security is financed, replacement rates, retirement ages, unemployment insurance, and moral hazard associated with health insurance.
The Welfare Benefit Reforms/ Austerity Measures implemented by the British Government. This presentation explorers the measures what they are and how they affect people living on welfare benefits.
7 Changes Coming to the Social Security Program in 2020mosmedicalreview
The document summarizes 7 changes coming to the Social Security program in 2020:
1) The SSA will start paying out more in benefits than it receives in revenue for the first time since 1983.
2) The COLA is expected to increase benefits by 1.8% on average.
3) The full retirement age will continue increasing to 67 for those born in 1960 or later.
4) More retirees will need to pay income taxes on Social Security benefits as thresholds have not been adjusted for inflation.
5) Those reaching full retirement age in 2020 or later cannot claim spousal benefits under a restricted application.
6) The option to file and suspend benefits to earn delayed retirement credits will end
The federal budget in 2013 collected $2.8 trillion in revenues. Individual income taxes were the largest source at $1.3 trillion. Social insurance (payroll) taxes were the second highest at $948 billion. Mandatory spending, such as Social Security and Medicare, accounted for $2 trillion of the $3.5 trillion in total spending. Revenues as a percentage of GDP were 16.7% in 2013, below the average of 17.2% between 1993 and 2012.
- The number of elderly people in the US is expected to grow substantially by 2050, increasing the demand for long-term services and supports (LTSS). Currently about 80% of elderly people receiving LTSS live in the community while 20% live in institutional settings like nursing homes.
- LTSS are financed through a mix of informal (unpaid) care provided by family/friends valued at $234 billion annually, and formal care paid for by Medicaid, Medicare and private sources totaling $192 billion in 2011. As the elderly population grows, financing LTSS will place increasing demands on families and federal and state budgets.
- Three potential scenarios for the future prevalence of functional limitations among the elderly and resulting demand for
How Social Security Works! Getting Texas Social Security Disability HelpVictor Makris
Getting Social Security Disability help isn't the clearest process. To help understand the program, Victor Makris offers an overview of the program. Learn more at http://www.houstonsocialsecuritydisabilityattorney.com/social-security-disability-help/
August 14 marks the 80th birthday of the Social Security program, which was established in the Social Security Act of 1935. Over the past 80 years, Social Security has provided important cash benefits and income security to seniors, survivors, individuals with disabilities, and their families – including to nearly 60 million people today. Yet Social Security is on a financially unsustainable course – and is not on track to be able to pay full benefits through its 100th birthday.
Sadly, instead of identifying solutions to prevent depletion of the trust funds, many commenters have relied on myths and half-truths to avoid having a conversation about the necessary choices. In this paper, we identify eight such myths – though there are many more
This document proposes a non-contributory pension scheme for the elderly in Lebanon. It summarizes the objectives and need for such a scheme given that 80% of elderly Lebanese over 65 do not have pensions and rely on family support. It then outlines Lebanon's existing social security schemes and their limitations. Several options for a non-contributory pension scheme are proposed, estimating the number of beneficiaries, pension amounts, and total costs. Financing options through the national budget are discussed. The scheme aims to alleviate poverty among the elderly and complement existing social security.
The Welfare Benefit Reforms/ Austerity Measures implemented by the British Government. This presentation explorers the measures what they are and how they affect people living on welfare benefits.
7 Changes Coming to the Social Security Program in 2020mosmedicalreview
The document summarizes 7 changes coming to the Social Security program in 2020:
1) The SSA will start paying out more in benefits than it receives in revenue for the first time since 1983.
2) The COLA is expected to increase benefits by 1.8% on average.
3) The full retirement age will continue increasing to 67 for those born in 1960 or later.
4) More retirees will need to pay income taxes on Social Security benefits as thresholds have not been adjusted for inflation.
5) Those reaching full retirement age in 2020 or later cannot claim spousal benefits under a restricted application.
6) The option to file and suspend benefits to earn delayed retirement credits will end
The federal budget in 2013 collected $2.8 trillion in revenues. Individual income taxes were the largest source at $1.3 trillion. Social insurance (payroll) taxes were the second highest at $948 billion. Mandatory spending, such as Social Security and Medicare, accounted for $2 trillion of the $3.5 trillion in total spending. Revenues as a percentage of GDP were 16.7% in 2013, below the average of 17.2% between 1993 and 2012.
- The number of elderly people in the US is expected to grow substantially by 2050, increasing the demand for long-term services and supports (LTSS). Currently about 80% of elderly people receiving LTSS live in the community while 20% live in institutional settings like nursing homes.
- LTSS are financed through a mix of informal (unpaid) care provided by family/friends valued at $234 billion annually, and formal care paid for by Medicaid, Medicare and private sources totaling $192 billion in 2011. As the elderly population grows, financing LTSS will place increasing demands on families and federal and state budgets.
- Three potential scenarios for the future prevalence of functional limitations among the elderly and resulting demand for
How Social Security Works! Getting Texas Social Security Disability HelpVictor Makris
Getting Social Security Disability help isn't the clearest process. To help understand the program, Victor Makris offers an overview of the program. Learn more at http://www.houstonsocialsecuritydisabilityattorney.com/social-security-disability-help/
August 14 marks the 80th birthday of the Social Security program, which was established in the Social Security Act of 1935. Over the past 80 years, Social Security has provided important cash benefits and income security to seniors, survivors, individuals with disabilities, and their families – including to nearly 60 million people today. Yet Social Security is on a financially unsustainable course – and is not on track to be able to pay full benefits through its 100th birthday.
Sadly, instead of identifying solutions to prevent depletion of the trust funds, many commenters have relied on myths and half-truths to avoid having a conversation about the necessary choices. In this paper, we identify eight such myths – though there are many more
This document proposes a non-contributory pension scheme for the elderly in Lebanon. It summarizes the objectives and need for such a scheme given that 80% of elderly Lebanese over 65 do not have pensions and rely on family support. It then outlines Lebanon's existing social security schemes and their limitations. Several options for a non-contributory pension scheme are proposed, estimating the number of beneficiaries, pension amounts, and total costs. Financing options through the national budget are discussed. The scheme aims to alleviate poverty among the elderly and complement existing social security.
Social Security is a federal program that taxes workers' payroll to provide income support for the elderly and disabled. It began in 1935 during the Great Depression to provide support for the elderly. Workers and employers pay payroll taxes that fund current retirees' benefits in a pay-as-you-go system. Nearly half of elderly Americans rely on Social Security for most of their income. Actuaries estimate future needs by reviewing past demographic and economic trends.
Social Security is a federal program that taxes workers' payroll to provide income support for the elderly and disabled. It began in 1935 during the Great Depression to provide support for the elderly. Workers and employers pay payroll taxes that fund current retirees' benefits in a pay-as-you-go system. Nearly half of elderly Americans rely on Social Security for most of their income. The program faces long-term financing issues if changes are not made.
Mandatory spending in the US federal budget in 2013 totaled $2.0 trillion, or 12.2% of GDP. The largest portions were $861 billion on major health care programs like Medicare and Medicaid, $808 billion on Social Security, and $340 billion on income security programs. Mandatory spending has increased as a percentage of GDP from 10.6% in 1993 due to growth in major health care programs and income security programs.
This document is a summary of an individual's Social Security statement. It provides estimates of their Social Security benefits based on their lifetime earnings record. It notes that the individual has already filed for and is receiving benefits. It also provides information about Social Security retirement, disability, family and survivor benefits. Additionally, it discusses factors that could impact estimated benefits and encourages the individual to review their earnings record for accuracy.
The document provides an overview of strategies for maximizing Social Security benefits. It discusses filing strategies such as claiming early benefits at age 62 or late benefits at age 70, filing and suspending strategies where one spouse files and suspends to allow the other to claim spousal benefits, and both spouses claiming their own benefits later. The future of Social Security is uncertain as the trust funds are projected to be depleted by 2037, requiring Congressional action to modify benefits and revenues.
This infographic provides an overview of CBO's report, The 2016 Long-Term Budget Outlook. Gain quick insight into why CBO projects a substantial imbalance in the federal budget beyond the next 10 years.
The federal budget deficit grew during the 2008-2009 recession and remained larger in 2013 than in 2008, amounting to $680 billion or 4.1% of GDP. Federal spending was 20.8% of GDP in 2013, slightly above the 40-year average, while revenues were 16.7% of GDP. Large budget deficits in recent years substantially increased federal debt held by the public to 72% of GDP in 2013, the highest level in over 60 years, which could negatively impact long-term economic growth.
The SSA provides retirement and disability benefits to millions of Americans, the latter involves a chart review. COVID-19 could impact these benefits.
The pension system in the Netherlands is undergoing significant reforms that will impact both employers and employees. The state pension age and standard pension retirement age are being increased to 67 to adapt to rising life expectancies. At the same time, the Financial Assessment Framework for pension funds is being revised, lowering the maximum accrual rates for pension schemes. These changes will require employers to modify their pension plans and employees to work longer before receiving their full pensions.
- The vast majority (88%) of the US federal budget is spent on five areas: healthcare, retirement, military, welfare, and interest on debt. The three largest areas are healthcare (26%), retirement (27%), and military (18%).
- The document proposes reducing spending in these three large areas in order to return the budget to surplus and pay down the national debt. Specific proposals include raising the eligibility ages for Social Security and Medicare benefits, reducing military spending by bringing troops home, and removing the healthcare mandate on employers.
- The savings would be used to fund a large public works program to employ unemployed Americans and stimulate the economy. Additional proposals aim to further reduce the deficit and encourage job growth.
The document proposes a six-step plan to reform the Illinois State Universities Retirement System (SURS) and set it on a path to long-term fiscal sustainability. The steps include: 1) linking annual retirement annuity increases to inflation; 2) setting the effective interest rate based on Treasury bond yields; 3) phasing in contributions from universities and colleges and increased employee contributions; 4) requiring the state to pay down unfunded liabilities on a set schedule; 5) replacing the current Tier II plan with a hybrid defined benefit and defined contribution plan for new employees. The proposal aims to reduce costs and liabilities while continuing to provide retirement security.
The document summarizes a Congressional Budget Office report on the distribution of federal spending and taxes in 2006. It finds that in 2006:
- Federal spending totaled $2.7 trillion while revenues were $2.4 trillion. Spending primarily went to cash/near-cash transfers, health care transfers, and other goods/services.
- Elderly households received more in transfers than they paid in taxes, while non-elderly households paid more in taxes than they received in transfers and other spending.
- Among non-elderly households, lower income groups received more in transfers than they paid in taxes, while higher income groups paid more in taxes than they received in transfers and other federal spending
This document provides a summary of key concepts from FIN 317 Week 11 Final Exam materials covering Chapters 7 through 15 related to types and costs of financial capital, securities law considerations, valuation, and capital budgeting. It includes true/false questions, multiple choice questions, and supplemental problems assessing topics such as weighted average cost of capital (WACC), economic value added (EVA), types of business entities, securities regulation exemptions, and valuation methods.
This document contains a quiz on analyzing financial statements. It includes 31 true-false questions and 15 multiple choice questions testing understanding of key concepts like horizontal analysis, vertical analysis, ratio analysis, and how different stakeholders analyze financial statements differently based on their interests like liquidity, profitability, and solvency. The quiz provides the answers and identifies which concepts and skills each question addresses.
The document provides sample exam questions for an accounting course covering governmental funds and long-term debt. It includes 30 multiple choice questions and 1 problem covering topics like capital projects funds, debt service funds, bond proceeds, interest payments, and debt refunding. The questions assess understanding of accounting entries and financial reporting for governmental funds.
This document provides a multiple choice quiz for an ACC 562 final exam. It includes 66 multiple choice questions testing concepts related to auditing, accounting, internal controls, and financial reporting. The questions cover topics such as audit assertions, audit procedures, analytical procedures, internal controls, accounting for inventory, goodwill, contingencies, and subsequent events.
This document provides a quiz for ACC 557 Week 11 that includes true-false statements and multiple choice questions related to analyzing financial statements. It tests understanding of key concepts like horizontal analysis, vertical analysis, ratio analysis, liquidity, profitability, and how different stakeholders evaluate financial performance. The quiz provides answers for each question along with learning objectives and difficulty levels.
Bus 536 week 11 final exam – strayer newsarahlazeto
This document provides a chapter summary and exam questions for BUS 536 Week 11 Final Exam from Strayer University. It includes 20 true/false questions and 29 multiple choice questions covering topics such as strategic alliances, networks, global competitive dynamics, and managing interfirm relationships. An online link is provided to purchase materials with the answers.
This document discusses key concepts learned in an MKT 500 marketing course over 10 weeks. It prompts the student to reflect on the two most important concepts learned, and to predict two ways these concepts can be applied to their current job and career. The student is asked to give their opinion on how the course's learning outcomes contribute to an MBA curriculum and provide a rationale.
This document discusses applying knowledge from a business course to a current or future position. It asks the reader to propose two applications of knowledge from the course and create a list of three best practices to follow in business.
This document contains a quiz for an economics course covering macroeconomic policy in an open economy. The quiz includes 25 multiple choice questions and 20 true/false questions testing understanding of topics like internal balance, external balance, expenditure-changing policies, expenditure-switching policies, the effects of monetary and fiscal policy in open economies, and international policy coordination. It also provides context about the Plaza Accord of 1985 where countries agreed to intervene to depreciate the US dollar.
Social Security is a federal program that taxes workers' payroll to provide income support for the elderly and disabled. It began in 1935 during the Great Depression to provide support for the elderly. Workers and employers pay payroll taxes that fund current retirees' benefits in a pay-as-you-go system. Nearly half of elderly Americans rely on Social Security for most of their income. Actuaries estimate future needs by reviewing past demographic and economic trends.
Social Security is a federal program that taxes workers' payroll to provide income support for the elderly and disabled. It began in 1935 during the Great Depression to provide support for the elderly. Workers and employers pay payroll taxes that fund current retirees' benefits in a pay-as-you-go system. Nearly half of elderly Americans rely on Social Security for most of their income. The program faces long-term financing issues if changes are not made.
Mandatory spending in the US federal budget in 2013 totaled $2.0 trillion, or 12.2% of GDP. The largest portions were $861 billion on major health care programs like Medicare and Medicaid, $808 billion on Social Security, and $340 billion on income security programs. Mandatory spending has increased as a percentage of GDP from 10.6% in 1993 due to growth in major health care programs and income security programs.
This document is a summary of an individual's Social Security statement. It provides estimates of their Social Security benefits based on their lifetime earnings record. It notes that the individual has already filed for and is receiving benefits. It also provides information about Social Security retirement, disability, family and survivor benefits. Additionally, it discusses factors that could impact estimated benefits and encourages the individual to review their earnings record for accuracy.
The document provides an overview of strategies for maximizing Social Security benefits. It discusses filing strategies such as claiming early benefits at age 62 or late benefits at age 70, filing and suspending strategies where one spouse files and suspends to allow the other to claim spousal benefits, and both spouses claiming their own benefits later. The future of Social Security is uncertain as the trust funds are projected to be depleted by 2037, requiring Congressional action to modify benefits and revenues.
This infographic provides an overview of CBO's report, The 2016 Long-Term Budget Outlook. Gain quick insight into why CBO projects a substantial imbalance in the federal budget beyond the next 10 years.
The federal budget deficit grew during the 2008-2009 recession and remained larger in 2013 than in 2008, amounting to $680 billion or 4.1% of GDP. Federal spending was 20.8% of GDP in 2013, slightly above the 40-year average, while revenues were 16.7% of GDP. Large budget deficits in recent years substantially increased federal debt held by the public to 72% of GDP in 2013, the highest level in over 60 years, which could negatively impact long-term economic growth.
The SSA provides retirement and disability benefits to millions of Americans, the latter involves a chart review. COVID-19 could impact these benefits.
The pension system in the Netherlands is undergoing significant reforms that will impact both employers and employees. The state pension age and standard pension retirement age are being increased to 67 to adapt to rising life expectancies. At the same time, the Financial Assessment Framework for pension funds is being revised, lowering the maximum accrual rates for pension schemes. These changes will require employers to modify their pension plans and employees to work longer before receiving their full pensions.
- The vast majority (88%) of the US federal budget is spent on five areas: healthcare, retirement, military, welfare, and interest on debt. The three largest areas are healthcare (26%), retirement (27%), and military (18%).
- The document proposes reducing spending in these three large areas in order to return the budget to surplus and pay down the national debt. Specific proposals include raising the eligibility ages for Social Security and Medicare benefits, reducing military spending by bringing troops home, and removing the healthcare mandate on employers.
- The savings would be used to fund a large public works program to employ unemployed Americans and stimulate the economy. Additional proposals aim to further reduce the deficit and encourage job growth.
The document proposes a six-step plan to reform the Illinois State Universities Retirement System (SURS) and set it on a path to long-term fiscal sustainability. The steps include: 1) linking annual retirement annuity increases to inflation; 2) setting the effective interest rate based on Treasury bond yields; 3) phasing in contributions from universities and colleges and increased employee contributions; 4) requiring the state to pay down unfunded liabilities on a set schedule; 5) replacing the current Tier II plan with a hybrid defined benefit and defined contribution plan for new employees. The proposal aims to reduce costs and liabilities while continuing to provide retirement security.
The document summarizes a Congressional Budget Office report on the distribution of federal spending and taxes in 2006. It finds that in 2006:
- Federal spending totaled $2.7 trillion while revenues were $2.4 trillion. Spending primarily went to cash/near-cash transfers, health care transfers, and other goods/services.
- Elderly households received more in transfers than they paid in taxes, while non-elderly households paid more in taxes than they received in transfers and other spending.
- Among non-elderly households, lower income groups received more in transfers than they paid in taxes, while higher income groups paid more in taxes than they received in transfers and other federal spending
This document provides a summary of key concepts from FIN 317 Week 11 Final Exam materials covering Chapters 7 through 15 related to types and costs of financial capital, securities law considerations, valuation, and capital budgeting. It includes true/false questions, multiple choice questions, and supplemental problems assessing topics such as weighted average cost of capital (WACC), economic value added (EVA), types of business entities, securities regulation exemptions, and valuation methods.
This document contains a quiz on analyzing financial statements. It includes 31 true-false questions and 15 multiple choice questions testing understanding of key concepts like horizontal analysis, vertical analysis, ratio analysis, and how different stakeholders analyze financial statements differently based on their interests like liquidity, profitability, and solvency. The quiz provides the answers and identifies which concepts and skills each question addresses.
The document provides sample exam questions for an accounting course covering governmental funds and long-term debt. It includes 30 multiple choice questions and 1 problem covering topics like capital projects funds, debt service funds, bond proceeds, interest payments, and debt refunding. The questions assess understanding of accounting entries and financial reporting for governmental funds.
This document provides a multiple choice quiz for an ACC 562 final exam. It includes 66 multiple choice questions testing concepts related to auditing, accounting, internal controls, and financial reporting. The questions cover topics such as audit assertions, audit procedures, analytical procedures, internal controls, accounting for inventory, goodwill, contingencies, and subsequent events.
This document provides a quiz for ACC 557 Week 11 that includes true-false statements and multiple choice questions related to analyzing financial statements. It tests understanding of key concepts like horizontal analysis, vertical analysis, ratio analysis, liquidity, profitability, and how different stakeholders evaluate financial performance. The quiz provides answers for each question along with learning objectives and difficulty levels.
Bus 536 week 11 final exam – strayer newsarahlazeto
This document provides a chapter summary and exam questions for BUS 536 Week 11 Final Exam from Strayer University. It includes 20 true/false questions and 29 multiple choice questions covering topics such as strategic alliances, networks, global competitive dynamics, and managing interfirm relationships. An online link is provided to purchase materials with the answers.
This document discusses key concepts learned in an MKT 500 marketing course over 10 weeks. It prompts the student to reflect on the two most important concepts learned, and to predict two ways these concepts can be applied to their current job and career. The student is asked to give their opinion on how the course's learning outcomes contribute to an MBA curriculum and provide a rationale.
This document discusses applying knowledge from a business course to a current or future position. It asks the reader to propose two applications of knowledge from the course and create a list of three best practices to follow in business.
This document contains a quiz for an economics course covering macroeconomic policy in an open economy. The quiz includes 25 multiple choice questions and 20 true/false questions testing understanding of topics like internal balance, external balance, expenditure-changing policies, expenditure-switching policies, the effects of monetary and fiscal policy in open economies, and international policy coordination. It also provides context about the Plaza Accord of 1985 where countries agreed to intervene to depreciate the US dollar.
This document summarizes a quiz for a business course. It contains 39 multiple choice questions about topics like business processes, business process management, systems development lifecycle, project management, and information systems development. The questions are from chapters 13 and 14 on business process management and systems development in the course textbook.
This document provides a quiz for an economics course on working capital management and international trade finance. It contains multiple choice and true/false questions covering topics like operating cycles, net working capital, cash management strategies for multinational enterprises, and financial instruments used in international trade like letters of credit. The quiz aims to test understanding of concepts related to managing current assets and liabilities in global business.
This document provides a quiz on supply chain management concepts from chapters 16 and 17. It includes multiple choice and true/false questions covering topics like investment recovery, hazardous waste management, inventory storage, transportation coordination, production planning, and supply function evaluation metrics. The questions assess understanding of key responsibilities, strategies, and trends within supply chain and materials management.
The document discusses various questions people have about their social security and retirement benefits, such as why cost of living adjustments have been low, potential changes to the social security system, and strategies for maximizing benefits like delaying claiming benefits. An expert answers the questions, explaining issues like the cost of living formula and outlining various proposals from a bipartisan commission to address challenges facing the social security system.
The federal budget will look very different in the future compared to the past. Under current law, federal debt will be much larger relative to the economy and a much larger share of spending will go to benefits for older Americans and healthcare. To put federal debt on a sustainable path, significant changes will need to be made through reducing benefits, raising taxes, or a combination of both. The Congressional Budget Office presentation outlines these future budget challenges and some options for addressing rising spending and debt.
This document discusses the history and current state of Social Security in the United States. It provides background on how Social Security was established in the 1930s to provide economic security for older Americans. It also discusses criticisms of the current Social Security system and various proposals for reforming it, including partially privatizing accounts or raising taxes. Projections show the system will face a funding shortfall in coming decades as more baby boomers retire.
This document from the Congressional Budget Office provides additional information on CBO's 2013 long-term projections for Social Security. It finds that:
- Social Security outlays exceeded tax revenues for the first time in 2010 and CBO projects the gap will average 12% of tax revenues over the next decade as more baby boomers retire.
- The Disability Insurance trust fund is projected to be exhausted in 2017 and the Old-Age and Survivors Insurance trust fund in 2033, though combining the two the funds would be exhausted in 2031.
- The amount of taxes paid and benefits received through Social Security varies between groups based on earnings, with higher earners paying more in taxes but receiving proportionately lower replacement rates
Running header: ASSIGNMENT 5 1
ASSIGNMENT 5 11
Assignment 5
Name
Collage
Subject
Course
Date
Topic: should the U.S Tax Social Security income ceilings for contributions be raised?
If the U.S Tax Social Security income ceiling or the contribution base is increased, this means that there will be an increase in the maximum social security tax to be collected from an individual worker. Thus, the Social Security changes determine the contribution base based on the Consumer Price Index for Urban Wage Earners. The contribution base thus determines the cost of living adjustment applied to the recipients. If there is no increase in the contribution base, then the consumer price index for urban wage earners remains the same as well as the cost of living. In U.S., the social security income benefits increases automatically in every year as long as the same (increase) is attributed in the Bureau of Labor Statistics’ Consumer Price Index for Urban Wage Earners and Clerical Workers, from the third quarter of the previous year to the corresponding period of the present year (Internal Revenue Service, 2010). However, this was not the case in the year 2010 because there was no change in the Consumer Price Index for the Urban Wage Earners. This means that the individual’s social benefits remain the same. This is because the social security Act prohibits an increase in the contribution base (Social Security’s Maximum Taxable Earnings). From the past, the contribution base increase was justified by the desire to achieve an improved system of financing as well as maintain meaningful benefits for the higher and middle earners.
The advantage of raising the contribution base is that the social security benefits will be put on a more stable footage. This means that more people will benefit from the program especially the future generation. However, requiring high income generators to contribute more on the benefits may be received with mixed reactions with some viewing the program as less equitable. Other reason to increase the contribution base beyond the wage indexed levels is to reflect the growing earning inequalities and help restore the financial balance (Livingston, 2008). However, according to the statistics, 53 percent of the American people would prefer to raise the contribution base in order to ensure social security’s solvency. This will require raising the income tax cap from the current limit on social security contribution from 110,000 dollars (the current limit) to more than 250,000 dollars (the proposed limit).
Since the amendments were enacted in the year 1977, the contribution base has risen automatically with an increase in average wages. The current proposal to further increase the contribution base tend to emphasis the rationa.
Retirement Planning With Cash Value Life Insurance FinalMark L. Simon
The document discusses challenges facing retirement savings and proposes supplementing savings with cash value life insurance. It notes that longer lifespans, inflation, and uncertain social security and pensions require greater personal savings. Cash value life insurance allows tax-deferred growth, tax-free retirement income and death benefits to help cover these needs. A case study shows how $10,000 annual premiums over 20 years can provide over $500,000 of benefits.
The document discusses several options for reforming Social Security in the United States. It outlines proposals to increase payroll taxes, raise or eliminate the taxable earnings maximum, change how benefits are calculated, modify retirement ages, and increase benefits for low-earners. It also discusses changing the cost-of-living adjustment, combining disability and retirement programs, and proposals to partially privatize the system through personal retirement accounts. Advocates and opponents of each approach argue about their potential effects on the long-term solvency of Social Security and retirement security.
The document discusses West Virginia's other post-employment benefits (OPEB) liability for retiree healthcare. It summarizes that while the costs are growing significantly, the liability is manageable rather than a crisis if put into proper context compared to budget and economic growth. Currently, retiree healthcare costs around $400 million annually but is projected to reach nearly $1 billion by 2025, though state budgets and GDP are also expected to grow considerably. The liability exists because the state has provided subsidized healthcare to retired public employees since the 1970s.
Finc 430Quiz 1 will be posted on Friday the 13th, but will need.docxvoversbyobersby
Finc 430:
Quiz 1 will be posted on Friday the 13th, but will need to be due by Sunday morning at 7am.
Discussion:
Select a publicly traded company, analyze the company's free cash flow. Why is free cash flow important to the company and any potential investor. Various sources on the Internet should provide you with the information as well as the company's financial statements.
Finc 355:
Discussion:
Pick one of the following assets and discuss who you want to leave it to (including charities) and how to do it best in terms of taxes, probate, liability to your estate and those who inherit: (a) house (b) IRA (c) life insurance (d) bonds (e) appreciated stock (f) piece of valuable art (g) cash (h) family business (i) royalties from an oil trust (j) savings bonds series EE (k) personal property ... OR discuss strategies to leave gifts to (a) children per stirpes or per capita (b) to your grandkids or (c) to your wife.
Do any of you have and employer provided retirement plan? What are the benefits? How would you rate it? Is it portable? How does it affect your taxes?
Quiz 2
FINC355 Professor Goohs – Retirement and Estate Planning
Quiz 2
NAME ____________________________ Due Date: June 15, 2014 (in assignment folder)
Please provide name above and provide answers in the chart below and submitting homework in MS Word in assignment folder for Quiz 2. (I’ll deduct points if you don’t).
Problem
Answer
Example
A
1
21
2
22
3
23
4
24
5
25
6
26
7
27
8
28
9
29
10
30
11
31
12
32
13
33
14
34
15
35
16
36
17
37
18
38
19
39
20
40
1.
Which of the following represents both the age after which an individual may no longer establish a non-rollover traditional IRA and the trigger point for beginning required distributions?
A. 65
B. 70½
C. 72½
D. 75
2. For individuals who have attained age 50 before the close of the tax year, what is the maximum dollar amount that may be contributed to a traditional IRA in 2013?
A. $3,000
B. $4,000
C. $5,000
D. $6,500
3. Pam wants to use money from a traditional IRA for a down payment to purchase a first home. How much can she withdraw from her IRA without having to pay the federal early distribution penalty?
A. $10,000
B. $12,500
C. $15,000
D. $20,000
4. Distributions from a traditional IRA cannot be made before the participant turns 59½ unless the IRA owner dies.
A. True
B. False
5. IRAs can be invested in a variety of investment vehicles, including mutual funds, stocks, bonds, and life insurance contracts.
A. True
B. False
6. Minnie and Micky Pluck are married, filing jointly in 2013. Minnie earns $60,000 a year and takes full advantage of her employer’s qualified retirement plan. Micky is not employed.
A. Micky can receive a full deduction for an IRA contribution
B. Micky can receive a partial deduction for an IRA contribution
C. both Micky and Minnie can make a nondeductible IRA contribution
D. Micky cannot make an IRA contribution
E. Minnie can make a nondeduc ...
The document discusses challenges facing Social Security and potential reforms. By 2034, Social Security's trust fund is projected to become depleted, requiring an automatic 20% benefits cut or 25% payroll tax increase. Several reform options are outlined, including gradually increasing taxes or reducing benefits, but none fully address the shortfall. The document emphasizes that earlier Congressional action allows for more gradual changes and planning. It also reviews the economy and financial markets in 2023, noting strong returns despite challenges. Five insights for 2024 markets are provided, including the potential for further gains if inflation stabilizes and rates are cut. The importance of staying invested through changing conditions is stressed.
The document discusses the history and types of pension plans. It begins with defining a pension as a way to provide income after retirement. It then covers the history of pensions from the late 18th century to modern reforms. The main types of pension plans discussed are defined benefit plans, defined contribution plans like 401(k)s, and hybrid plans. It also addresses how the current economic crisis has impacted pension funding.
This document summarizes Massachusetts' unemployment insurance program, including its federal-state partnership structure, funding sources, eligibility requirements, benefit amounts and durations, employer tax rates, and recent stimulus enhancements. Key points include: Massachusetts offers up to 30 weeks of standard UI benefits, plus additional weeks of extended federal benefits during periods of high unemployment. Benefit amounts are based on prior earnings. The program is funded through a payroll tax on employers, with tax rates varying based on balances in employer reserve accounts and the state trust fund. The federal stimulus bill provided additional funding and benefits through 2010.
Assignment 7, Chapter 15 NAME _______________________________
FIN 3610
1. a. Explain the various definitions of disability that are found in disability-income insurance. Not sure about the answer
The definition of total disability is stated in the policy. There are several definitions of total disability:
(1) Inability to perform all duties of the insured’s own occupation
(2) Most insurers today use amodified own occupationdefinition of total disability. Because of injury or sickness, you are unable to perform the material and substantial duties of your own occupation, and are not engaged in any other occupation.
(3) Inability to perform the duties of any occupation for which the insured is reasonably fitted by education, training, and experience
(4) Inability to perform the duties of any gainful occupation
(5) Loss-of-income test in some companies
Some individual disability income policies have a two-part definition. For some initial period of disability, such as two to five years, total disability is defined in terms of your own occupation. After the initial period of disability expires, the any occupation definition of disability is applied.
b. Briefly explain the following disability-income insurance provisions: Residual disability, Benefit period, Elimination period, Waiver of premium. Not sure about the answer
(1) Residual disability means that a pro rata disability benefit is paid to an insured whose earned income is reduced because of an accident or sickness.
(2) The benefit period is the length of time that disability benefits are payable after the elimination period is met.
(3) An elimination period is a waiting period during which time benefits are not paid. Insurers offer a range of benefit periods, such as 30, 60, 90, 180, or 365 days.
(4) Most policies include a waiver-of-premium provision. The insured must meet the definition of disability stated in the policy. If the insured is totally disabled for 90 days, future premiums will be waived as long as the insured remains disabled.
2. Identify five major provisions of the Affordable Care Act that will have an impact on individuals and families. Document your source and attach a copy of your information.
Need plz Document your source and attach a copy of your information.
Plz look for website about these info.
Provisions in the Affordable Care Act that will affect individuals and families include the following:
Individual mandate. Beginning in 2014, most citizens in the United States and legal residents must have qualifying health insurance or pay a financial penalty.
Preexisting conditions exclusions prohibited. Children under age 19 with a preexisting condition cannot be denied coverage or rated up because of a preexisting condition. Beginning in 2014, adults cannot be denied coverage or rated up because of a preexisting condition.
Retention of coverage until age 26. The new law allows young adults to remain on their parents’ policy until age 26.
Guaranteed acces ...
The document summarizes key facts about the U.S. Social Security program. It finds that in 2020 over 64 million people received Social Security benefits, with the average monthly benefit being $1,516 for retired workers. By 2035, the Social Security Trust Fund reserves are projected to be depleted. The document also outlines options to improve the programs financial status, such as by raising the earnings cap subject to Social Security taxes or gradually increasing contribution rates.
Joel Flinchbaugh from Smith Elliott Kearns & Company presented on the tax impacts of the Affordable Care Act. Key points include: the Act will cost $940 billion over 10 years and expand coverage to 32 million Americans; businesses must comply with new reporting and coverage requirements or pay penalties; and individuals will pay higher Medicare taxes, see limits on flexible spending accounts and medical deductions, and face a penalty if uninsurred starting in 2014. The presentation provided details on these new requirements and their implications.
This study compares the benefits and the funding for CalPERS pensions vs. Social Security. It also looks in more detail on the financial burden of CalPERS pensions on the Marin Municipal Water District.
The federal minimum wage is $7.25 per hour for most workers. CBO has examined how increasing the federal minimum wage to $10, $12, or $15 per hour by 2025 would affect employment and family income. Increasing the minimum wage would have two principal effects on low-wage workers. For most of them, earnings and family income would increase, which would lift some families out of poverty. But other low-wage workers would become jobless, and their family income would fall—in some cases, below the poverty threshold.
America's Retirement Safety Net and information for you to understand the social security, medicare and financial needs after retirement. For more topics you can visit our other flipbooks at http://www.ferrettafinancialservices.com/sitemap.htm .
Happy reading:-
Wassim Zhani Federal Taxation Chapter 1 An Overview of Federal Taxation.pdfWassim Zhani
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1. ECO 450 Week 11 Final Exam – Strayer
Click on the Link Below to Purchase A+ Graded Course Material
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Chapters 8 Through 18
ECO 450 Week 6 Quiz
C H A P TER 8
Social Security and
Social Insurance
2. TRUE/FALSE QUESTIONS
1. The Social Security pension system is a fully funded retirement plan.
2. Social Security pension benefits are transfers from workers to retirees.
3. Social Security pensions are financed by voluntary contributions by
workers.
4. The gross replacement rate measures the ratio of taxes paid per year by
workers to their annual Social Security pension when they retire.
5. In the year prior to retirement, a worker earned $20,000 and paid $5,000 in
taxes on those earnings. His annual Social Security pension is $10,000 per
year. Then it follows that his net replacement rate is 50 percent.
6. The gross replacement rate for Social Security pensions is the same for all
workers independent of their preretirement earnings.
7. The annual growth in wages subject to Social Security taxes is 3 percent.
Given the payroll tax rate, the growth in funds available to pay pension
benefits is also 3 percent.
8. The asset-substitution effect of Social Security pensions discourages
saving.
9. The availability of Social Security pensions to workers over normal
retirement age results in an income effect unfavorable to work but no
substitution effect.
10. The bequest effect of Social Security encourages workers to save less.
11. The normal retirement age for Social Security old-age pensions is 67 for
people born in the United States in 1960 or later.
12. Workers in the United States can retire under Social Security at age 62 with
lower pensions than they would receive at their normal retirement age.
13. As of 2009, retired workers between the ages of 62 and their normal
retirement age were subject to an “earnings test” that reduced their pension
by $1 for each $2 of earnings after a certain minimum level of earnings.
14. Reducing the replacement rate will have no effect on the tax rate necessary
to finance pensions under a pay-as-you-go, tax-financed pension system.
15. Workers who quit their jobs are eligible for unemployment insurance benefits
in the United States.
16. By 2050, the expected percentage of the U.S. population that is
considered elderly will be less than 20%.
17. Social Security was created in 1965.
18. On average, the elderly are less likely to be poor when compared to the
rest of the U.S. population.
3. MULTIPLE CHOICE QUESTIONS
1. The Social Security retirement system:
a. is a fully funded pension system.
b. is a tax-financed system that pays benefits from taxes that are invested
to return principal and interest to workers when they retire.
c. is a tax-financed retirement system that finances pensions by taxing
workers each year and transferring the bulk of revenues obtained
directly to retirees.
d. does not use taxes on workers to pay pensions to retirees.
2. The gross replacement rate:
a. measures a worker’s monthly retirement benefit divided by monthly
earnings before taxes in the year prior to retirement.
b. measures a worker’s monthly retirement benefit divided by monthly
earnings after taxes in the year prior to retirement.
c. is an increasing function of gross monthly earnings prior to retirement.
d. is independent of gross monthly earnings prior to retirement.
3. A worker earns $2,000 per month before taxes. He pays $140 per month
payroll tax on those wages. In addition, the income taxes on those wages are
$360 per month. On retirement, the worker receives a Social Security
pension of $750 per month. Which of the following statements is true?
a. The worker’s gross replacement rate is 50 percent.
b. The worker’s net replacement rate is 50 percent.
c. The worker’s net replacement rate is 38 percent.
d. The worker’s net replacement rate is 75 percent.
4. The growth in hourly wages over the past 50 years has averaged about 2
percent per year. However, the growth in Social Security pensions has far
exceeded this 2-percent rate. The growth in tax revenue to finance Social
Security benefits in excess of 2 percent per year can be accounted for by:
a. increases in payroll tax rates.
b. use of other taxes beside the payroll tax to pay Social Security benefits.
c. an increase in the number of workers paying Social Security taxes.
d. either (a) or (b)
e. either (a) or (c)
5. Given the structure and level of gross replacement rates and the expected
future growth of labor earnings subject to the payroll tax, the tax rates used
to tax payrolls were increased in the 1980s because:
a. the number of retirees per worker will increase.
b. the number of retirees per worker will decrease.
c. wages are expected to decline.
d. the size of the work force is expected to increase.
6. Which of the following is likely to increase the net federal debt as a share of
GDP?
a. a federal budget surplus.
4. b. a federal budget deficit.
c. a recession.
d. either b or c.
7. The asset-substitution effect of the Social Security retirement system leads
all workers to:
a. save more for retirement.
b. save less for retirement.
c. save absolutely nothing for retirement.
d. work more
8. Which of the following is a consequence of a growing federal budget
deficit in the United States?
a. A decrease in the federal debt outstanding.
b. An increase in the federal debt outstanding.
c. A decrease in the portion share of federal government expenditures that
must be allocated to interest in the future.
d. An increase in national saving.
9. The induced-retirement effect of the Social Security pension system induces
workers to:
a. save less for retirement.
b. save more for retirement.
c. reduce savings for retirement to zero.
d. work more after retirement.
10. Unemployment insurance benefits are:
a. financed by payroll taxes levied on workers.
b. financed by payroll taxes levied on employers.
c. both (a) and (b)
d. financed by sales taxes.
11. Which of the following is true about the Social Security pension system in
the United States?
a. Pensions received by retired workers are based entirely on their
contributions to the Social Security pension trust fund and the
investment return on that fund.
b. Pensions received by married retirees with dependents are greater than
that received by those without dependents.
c. Gross replacement rates are inversely related to preretirement earnings.
d. both (b) and (c)
12. Which of the following can decrease tax rates necessary to pay pensions for a
pay-as-you-go pension system?
a. an increase in replacement rates
b. a decrease in the retirement age
c. an increase in the size of the work force
d. an increase in the number of retirees
5. 13. Unless legislation is introduced to change the normal retirement age, people
born in 1960 or later will be able to retire with full Social Security benefits
at age:
a. 62.
b. 65.
c. 66.
d. 67.
6. 14. The earnings test for retirees:
a. increases their incentive to work.
b. is applied to all retirees.
c. is applied only to retirees below normal retirement age.
d. reduces pension benefits by $1 for each $2 of earnings.
e. both (c) and (d)
15. A nation has 40 million current retirees and a work force of 100 million.
Which of the following is true?
a. The replacement rate is 40 percent.
b. The replacement is 2.5.
c. The dependency ratio is 0.4.
d. The dependency ratio is 2.5.
16. Social Security tax rates can be reduced if:
a. taxable wages decline.
b. the retirement age is lowered.
c. the retirement age is raised.
d. the work force decreases in size.
17. A retiree subject to the earnings test under Social Security:
a. can earn as much as he or she chooses without losing Social Security
pension benefits.
b. has his or her Social Security pension benefits reduced by one dollar for
each dollar of labor earnings.
c. has his or her Social Security pension benefits reduced immediately by
one dollar for each three dollars of labor earnings.
d. has his or her Social Security pension benefits reduced by one dollar for
each two dollars of earnings after a certain minimum amount per year.
18. A pay-as-you-go social security retirement system is:
a. exemplified by the current U.S. social security system.
b. exemplified by the current Chilean social security system.
c. designed to have retirees set aside a contribution specifically for
themselves during their earlier working life.
d. both (a) and (b).
19. Approximately, what percentage of beneficiaries of U.S. Social Security
are retired workers?
a. 50%
b. 60%
c. 70%
d. 80%
20. The Social Security Act was implemented in the United States in:
a. 1927.
b. 1935.
c. 1947.
d. 1965.
7. C H A P TER 9
Governme nt and Health Care
TRUE/FALSE QUESTIONS
1. In the United States the government pays the health bills of 90 percent of
the population.
2. The American system of health care is financed by a mix of private and
government insurance programs that pay over 80 percent of the health care
bills for U.S. citizens.
3. Spending per person on health care in the United States is less than in the
United Kingdom where national health insurance finances health
expenditures.
4. Government spending on health care is declining as a percent of total
government spending.
5. Medicare is a government program of health insurance for the elderly.
6. Exclusion of employer-provided health insurance to employees is an
indirect subsidy to private provision of health insurance.
7. Third-party payments for health care services increase the quantity of health
care demanded by reducing out-of-pocket costs to patients.
8. An increase in coinsurance and deductibles for health insurance can
contribute to a reduction in expenditures on health care.
9. Half of Americans do not have health insurance coverage.
10. Under national health insurance in Great Britain, the price system is used to
ration health care.
11. Approximately 16 percent of GDP was allocated to provision of health care
in the United States as of 2006.
12. Individuals in the United States, on average, pay 50 percent of their health
care costs out-of-pocket, and the remaining 50 percent is paid by insurance,
governments, and charity.
8. 13. Asymmetric information in the market for health care occurs when sellers
of medical care are better informed about cost and quality of care than
buyers.
14. Because of third-party payment for services in the market for health care,
the price paid by buyers is less than the payment sellers receive, and the
marginal social cost of health care exceeds its marginal social benefit.
15. Medicaid costs are paid entirely by the federal government.
16. Healthcare expenditures in the U.S. are projected to be 20% of GDP by
2017.
17. Asymmetric information can occur when the provider of a service is
better informed than the consumer of the service.
18. A risk averse individual prefers to pay certain modest costs in
exchange for possible unforeseen high costs.
MULTIPLE CHOICE QUESTIONS
1. Most of the medical bills of Americans in the United States are paid by:
a. the patients.
b. private and government health insurance.
c. charities.
d. Medicaid.
2. Since 1960, expenditures on health care as a percent of GDP has:
a. been cut in half.
b. nearly tripled.
c. remained the same.
d. doubled.
3. The government program that provides the health insurance to the poor in
the United States is called:
a. national health insurance.
b. Medicare.
c. Medicaid.
d. employer-provided health insurance.
4. Which of the following programs accounts for the greatest amount of
government expenditures on public health in the United States?
a. Medicare
b. worker’s compensation
c. the Public Health Service
d. medical research
5. Which of the following subsidizes private provision of health insurance?
a. Medicare
b. Medicaid
9. c. the Public Health Service
d. tax exclusion of the value of employer-provided health insurance to
workers
6. Which of the following could help decrease the rate of increase of
spending on health care in the United States?
a. a reduction in the deductibles on private health insurance policies
b. an increase in the coinsurance rate on health insurance and subjecting a
larger volume of services to coinsurance
c. extension of Medicaid insurance to all persons who are poor
d. a reduction in the coinsurance rate on health insurance and subjecting a
smaller volume of services to coinsurance
7. Which of the following is an example of the “moral hazard of health
insurance”?
a. an increase in the number of surgeries prescribed for benign prostate
disease beyond the point at which the marginal benefit equals the
marginal cost
b. a decreased willingness of individuals to go to the doctor for minor
ailments because of increases in coinsurance rates
c. an underallocation of resources to medical care because of monopoly
power of hospitals
d. experience rating of health insurance groups by health insurers
8. A third-party payment system for health care:
a. results because of externalities in the production of health care services.
b. encourages more than the efficient amount of resources to be allocated
to health care.
c. encourages patients and health care providers to economize on the use
of health care resources.
d. means that patients pay the full price for health care services they
consume.
9. Which of the following services is typically not covered under private health
insurance and Medicare in the United States?
a. treatment for heart attack
b. surgery
c. office visits to physicians
d. long-term care services
10. Under national health insurance as operated in Great Britain,
a. the British system pays fees equal to half of the costs of services
provided to them.
b. general practice physicians are paid on a per-patient rather than on a
per-unit-of-service basis.
c. patients requiring surgery can pick their surgeons and can usually obtain
the surgery in a matter of days, even if it is not an emergency.
d. there are no government limits on health care spending by hospitals.
10. 11. Which of the following is true about the Medicaid program in the United
States?
a. It is a program of health insurance for the elderly.
b. Its costs are paid entirely by the federal government.
c. It is a program of health insurance for the poor.
d. Its costs have been declining in recent years.
12. In the United States, individuals pay approximately what percent of the cost
of their medical care directly to providers?
a. 100 percent
b. 50 percent
c. 15 percent
d. zero
13. The percent of total health care costs in the United States paid for by
governments is approximately:
a. 90 percent.
b. 45 percent.
c. 25 percent.
d. 10 percent.
14. The system of third-party payment for medical care in the United States has
which of the following effects in the market for health care?
a. It improves efficiency in the market.
b. It causes the marginal social benefit of health care to exceed its
marginal social cost.
c. It causes the marginal social cost of health care to exceed its marginal
social benefit.
d. It results in less than the efficient quantity of health care services.
15. Which of the following is true about the Medicare program in the United
States?
a. It is only available to those who pass a means test.
b. It is available to all citizens over the age of 65.
c. The costs are completely financed by fees paid by insurees.
d. It places no limits on reimbursement to medical care providers.
16. What would be the effect of having no health insurance available?
a. The quantity of healthcare would be set at where the marginal benefit
and marginal cost are equal.
b. Excess demand for healthcare would be the result because the quantity
supplied would be at a level where the marginal benefit exceeds the
marginal cost.
c. Excess supply for healthcare would be the result because the quantity
supplied would be at a level where the marginal benefit would be below
the marginal cost.
d. the quantity of healthcare would be at an inefficient level.
11. 17. The elderly are what proportion of beneficiaries of Medicare?
a. 95%
b. 85%
c. 77%
d. 70%
18. What is the moral hazard associated with third party payment for health
services?
a. The recipient of the service is not as informed as the provider of the
service.
b. The recipient of services tends to decline more services than they
should.
c. The recipient of services tends to have more services than what is
needed relative to the efficient level of services.
d. There is no moral hazard.
19. Which is not reason for excalating healthcare costs in the U.S.?
a. Increase in malpractice insurance.
b. Cross-subsidization of patients who cannot pay for healthcare or
insurance.
c. Overuse of new technology.
d. Both (b) and (c).
20. If the quantity of healthcare is more than the efficient quantity, what is the
consequence?
a. Some will not have access to healthcare that would have access at the
efficient level.
b. The healthcare will suffer in quality.
c. Capital could be more efficiently spent elsewhere leading to less overall
productivity.
d. Lower marginal costs and marginal benefits.
12. ECO 450 Week 7 Quiz
C H A P TER 1 0
Introduction to
Governme nt Finance
TRUE/FALSE QUESTIONS
1. Taxes simultaneously ration and finance government goods and services.
2. The federal government finances only half of its expenditures with taxes.
3. The benefit principle argues that the means of financing government goods
and services should be linked to the benefits received from those goods and
services.
4. Horizontal equity is achieved when individuals of the same economic
capacity pay the same amount of taxes over a given period.
5. A flat-rate income tax is a proportional tax on an income base.
6. The marginal tax rate will eventually exceed the average tax rate if the tax
rate structure is proportional.
7. The marginal tax rate for a payroll tax is 7 percent on all wages up to $60,000
per year. The marginal tax rate for wages in excess of $60,000 per year is
zero. The payroll tax is therefore a regressive tax.
8. Tax evasion would be less of a problem if tax rates were lowered.
9. The user charge for a congestible public good should be zero at all times.
10. Zero prices for price-excludable government services provide benefits only
to the poor.
11. The gasoline tax is an example of a general tax on consumption.
12. For a proportional tax, the marginal tax rate is always equal to the average
tax rate.
13. Tax avoidance is an illegal activity in the United States.
14. An increase in marginal tax rates is likely to increase tax evasion.
15. Most studies indicate that state-run lotteries are equivalent to a progressive
tax on gambling.
16. Government activity requires the reallocation of resources from
government to private use.
13. 17. A flat income tax (i.e. a fixed amount paid by every taxpayer) is an
example of a selective tax.
18. The average tax rate and marginal tax rate are the same under a
progressive tax rate structure.
MULTIPLE CHOICE QUESTIONS
1. According to the benefit principle,
a. taxes should be distributed according to ability to pay.
b. user charges are an ideal source of finance for government goods and
services.
c. the progressive income tax represents the ideal way of distributing taxes
among citizens.
d. flat-rate taxes are always the best kind.
2. If horizontal equity is achieved in taxation,
a. vertical equity will also be achieved.
b. individuals of equal economic capacity will pay equal taxes.
c. a flat-rate tax will be used.
d. the tax system will not result in losses in efficiency in markets.
3. The tax base of a payroll tax is:
a. consumer expenditures.
b. interest income.
c. labor income.
d. both (b) and (c)
4. A 5-percent retail sales tax on all consumer purchases in a state is imposed.
The sales tax is:
a. a flat-rate tax.
b. a tax with a regressive rate structure.
c. levied on an income base.
d. all of the above
5. A tax on the value of real estate holdings is a:
a. selective tax on wealth.
b. general tax on wealth.
c. general tax on income.
d. selective tax on income.
6. An excise tax is a:
a. general consumption tax.
b. selective consumption tax.
c. general wealth tax.
d. selective tax on wealth.
14. 7. A proportional income tax has an average tax rate that:
a. always is less than the marginal tax rate.
b. always exceeds the marginal tax rate.
c. equals the marginal tax rate at first and then becomes less than the
marginal tax rate.
d. always equals the marginal tax rate.
8. A payroll tax taxes a worker’s wages at 14 percent until the worker earns
$60,000 per year. All labor earnings in excess of $60,000 are not subject to
tax. The tax rate structure of the payroll tax is therefore:
a. proportional.
b. progressive.
c. regressive.
d. flat-rate.
9. A bridge becomes congested after 100 vehicles per hour use it on any day.
To achieve efficiency, a toll:
a. that charges all users of the bridge, no matter how many vehicles use it
per hour, should be imposed.
b. on additional users in excess of 100 per hour should be imposed.
c. on all users should be imposed, if more than 100 users per hour are
expected.
d. is not required.
10. A government prints money to finance its expenditures. As a result,
a. the economy can operate at a point outside its production possibility
curve.
b. inflation will occur.
c. consumers will give up private goods to finance the increased
government expenditures.
d. both (b) and (c)
11. Taxes are likely to affect:
a. market equilibrium.
b. political equilibrium.
c. the distribution of income.
d. all of the above
12. Taxes:
a. are voluntary payments to governments.
b. are unlikely to affect market supply and demand.
c. never affect efficiency in the allocation of resources.
d. are compulsory payments associated with certain activities.
13. A tax on real estate is a:
a. general wealth tax.
b. general consumption tax.
c. selective wealth tax.
15. d. selective income tax.
14. The marginal tax rate will eventually exceed the average tax rate for a:
a. proportional tax.
b. regressive tax.
c. progressive tax.
d. flat-rate tax.
15. Marginal tax rates were reduced in 2001. Other things being equal, this is
likely to:
a. increase tax evasion.
b. decrease tax evasion.
c. have no effect on tax evasion.
d. increase tax avoidance.
16. What is an example of a normative criterion that a government must trade-
off in its method of
taxation?
a. Equity
b. Efficiency
c. Administrative ease
d. all of the above
17. Tax avoidance is:
a. a means of tax evasion.
b. a means of decreasing taxes paid by adjusting behavior.
c. a political process explicitly for the reduction of taxation.
d. a means to avoid tax owed.
18. If the marginal tax rate is 20% under a proportional tax rate structure, the
average tax rate:
a. should be 20%.
b. should be above 20%.
c. should be below 20%.
d. cannot be determined.
19. If the average tax rate under a progressive tax rate structure is 35%, a
possible marginal tax rate is:
a. 30%.
b. 25%.
c. 42%.
d. not able to be determined.
20. Which of the following countries has the highest average tax rate relative to
GDP?
a. Japan
b. Sweden
c. Iceland
16. d. United Kingdom
ECO 450 Week 8 Quiz
C H A P TER 1 1
Taxation, Prices, Efficiency,
and the Distribution of Income
TRUE/FALSE QUESTIONS
1. A lump-sum tax results in both income and substitution effects.
2. A consumer currently pays $500 a year retail sales taxes. She would be
better off if she paid the same amount annually as a lump-sum tax.
3. Clothing is sold in perfectly competitive markets where no externalities
prevail. An excise tax on clothing will result in a market price for clothing
that equals the marginal social benefit and marginal social cost of service.
4. Assuming that the income effects are negligible and that beer is sold in a
competitive market, a 10-cent per can tax on beer that causes a 10,000 can
per month decline in sales will result in an excess burden of $1,000 per
month.
5. A tax on land results in an income effect on landlords but no substitution
effect. Then it follows that the excess burden of a tax on land will be zero.
6. The excess burden of a tax on interest income is $5 billion per year. Total
interest income per year is $50 billion. The tax currently collects $15 billion
in revenue per year. The efficiency-loss ratio of the tax is therefore 0.33.
7. A payroll tax results in a difference between the gross wages paid by
employers and the net wages received by workers.
8. If the market supply of labor services is perfectly inelastic, a tax on labor
income will reduce the net wages received by workers by the full amount of
the tax per labor hour.
9. If a $10 per unit tax is levied on the output of a monopolist, more of that tax
will be shifted to consumers than would be the case if the same good were
produced by a competitive industry.
17. 10. A study indicates that taxes in the United States reduce the Gini coefficient for
the nation by 10 percent. This implies that taxes make the income
distribution more equal.
11. A lump-sum tax only results in income effects.
12. An income tax is an example of a price-distorting tax.
13. The more price-elastic the demand of a taxed item, the lower the excess
burden of a tax on the sale of that item.
14. If the tax on the sale of gasoline is doubled from 20 cents per gallon to 40
cents per gallon, the excess burden of the tax will quadruple.
15. If the compensated elasticity of supply of labor is zero, then a tax on labor
earnings will have zero excess burden.
16. Lump-sum taxes do not prevent prices from equaling the marginal
social cost and benefit of any goods and services.
17. Lump-sum taxes can vary in amount based on income level.
18. A lump-sum tax can distort prices and affect consumption behavior.
MULTIPLE CHOICE QUESTIONS
1. A lump-sum tax:
a. distorts market prices so that they do not simultaneously equal MSB and
MSC.
b. can result in price changes but does not prevent prices from
simultaneously being equal to MSB and MSC.
c. results in substitution effects that change prices.
d. results in both substitution effects and income effects that change prices.
2. The current price of compact discs, which are traded in perfectly
competitive markets, is $10. A $1 per unit tax is levied on the discs.
Annual record sales decline from five million to four million as a result of
the tax. Assuming that the income effect of the tax-induced price change is
negligible, the excess burden of the tax will be:
a. $500,000 per year.
b. $1 million per year.
c. $2 million per year.
d. $2.5 million per year.
3. The elasticity of supply of land is zero. A tax on land results only in an
income effect to landlords. Then it follows that a 10-percent tax on land
rents will:
a. have a positive excess burden.
b. be shifted forward to tenants.
c. be paid entirely by landlords.
d. have zero excess burden.
18. e. both (c) and (d)
4. Currently, a 10-cent per gallon tax is levied on gasoline consumption. The tax
is increased to 20 cents per gallon. The excess burden of the tax will:
a. remain the same.
b. double.
c. increase four times.
d. decline.
5. The supply of new cars is perfectly elastic. A $400 per car tax is levied on
buyers. As a result of the tax,
a. the price received by sellers will fall by $400.
b. the price paid by buyers, including the tax, will increase by $400.
c. the quantity of cars sold per year will be unchanged.
d. the excess burden of the tax will be zero.
e. both (c) and (d)
6. Other things being equal, the more inelastic the demand for a taxed good,
a. the greater the portion of the tax paid by sellers.
b. the greater the excess burden of the tax.
c. the greater the portion of the tax paid by buyers.
d. the less the portion of a tax on sellers that can be shifted to buyers.
7. The market supply of labor is perfectly inelastic. However, the income
effect of tax-induced wage changes are believed to be substantial. Then it
follows that a tax on labor income will:
a. have zero excess burden.
b. have positive excess burden.
c. be paid entirely by workers as a reduction in net wages.
d. both (a) and (c)
e. both (b) and (c)
8. Suppose an economy is comprised of only two markets: one for food and
the other for housing. A tax on food used to finance transfer payments is
likely to:
a. decrease the price of food.
b. increase the price of housing.
c. decrease the price of housing.
d. have no effect on either the price of food or housing.
9. Differential tax incidence measures the effect:
a. that a tax and the expenditures it finances have on the distribution of
income.
b. that one tax alone has on the distribution of income.
c. on the distribution of income of substituting one tax for another while
holding the size and composition of the budget fixed.
d. on the distribution of income of substituting one tax for another while
changing the kinds of government services financed.
19. 10. Most studies of tax incidence assume that taxes on labor income and other
input services are borne entirely by the workers and other input owners that
supply the services. This implies that the:
a. supply of those input services is very elastic.
b. supply of those input services is of unitary elasticity.
c. supply of those input services is perfectly inelastic.
d. demand for those input services is perfectly elastic.
11. Most studies show that the price elasticity of demand for gasoline is –0.2. If
the price elasticity of supply is 2, then a tax on gasoline will:
a. have no effect on the market equilibrium price of gasoline.
b. cause the market equilibrium price of gasoline to fall.
c. cause the market equilibrium price paid by buyers to rise.
d. cause the net price received by sellers to fall.
e. both (c) and (d)
12. The demand for medical care is very inelastic. If a 10-percent tax is levied
on the sale of medical services and is collected from medical-care
providers, then:
a. the incidence of the tax is likely to be borne entirely by medical-care
providers.
b. most of the tax is likely to be shifted to those who purchase medical
care.
c. the market equilibrium price of medical care will fall.
d. the excess burden of the tax is likely to be very high.
13. Which of the following is true about a lump-sum tax?
a. It prevents efficiency from being attained in competitive markets.
b. It causes substitution effects.
c. It causes income effects.
d. It causes both income effects and substitution effects.
14. Housing construction is generally believed to be an industry of constant
costs. In the long run, which of the following is true if a $10 per square foot
tax on housing construction is collected directly from builders?
a. The incidence of the tax will be borne by builders.
b. The excess burden of the tax will be zero.
c. The quantity of new construction supplied will be unaffected.
d. The tax will be fully shifted to buyers of new construction.
15. If the price elasticity of supply of labor is equal to 0.5 and the price
elasticity of demand for labor is –2, then which of the following is likely to
result from a tax on labor earnings?
a. The tax will be fully borne by workers.
b. Some of the tax will be shifted to employers as market equilibrium
wages increase.
c. Market equilibrium wages will decline.
d. There will be no effect on market equilibrium wages.
20. 16. If a lump-sum tax is imposed, the slope of the new budget line relative to
the budget line prior to the tax:
a. remains unchanged.
b. increases.
c. decrease.
d. can increase and decrease in different regions.
17. Viewed from origin a price distorting tax creates a new budget line with a
______ slope relative to the budget line without the tax.
a. less steep
b. more steep
c. similar
d. varying
18. A $0.30 per unit tax is imposed on a good that reduces the quantity supplied
and demanded by 1000 units. What is the deadweight loss (ignore price
elasticities)?
a. $300.00
b. $100.00
c. $150.00
d. Cannot be determined.
19. If a per unit tax is imposed, but the quantity supplied and demanded does
not change then:
a. the demand is perfectly inelastic.
b. the supply is perfectly inelastic.
c. there is no deadweight loss.
d. All of the above.
20. The efficiency-loss ratio relative to tax is:
a. the deadweight loss less the tax revenue.
b. the deadweight loss divided by the tax revenue reduced by one.
c. the excess burden divided by the tax revenue.
d. None of the above.
21. C H A P TER 1 2
Budget Balance and
Governme nt Debt
TRUE/FALSE QUESTIONS
1. From 1950 to 2009, the federal government budget has been in balance in
most years.
2. The high employment budget deficit implies that increases in economic
activity will not eliminate the actual deficit.
3. Other things being equal, an increase in government borrowing is likely to
increase interest rates.
4. If taxpayers anticipate future tax increases when government borrows to
finance deficits, increased government borrowing will increase interest
rates.
5. As of 2008, the amount of federal debt outstanding was equal to twice the
annual GDP.
6. From 1950 to 1980, the value of the federal debt as a percent of GDP
declined.
7. More than 50 percent of the federal debt in recent years has been outside
debt.
8. An increase in market rates of interest tends to decrease the market value of
outstanding government debt.
9. Deficit finance postpones taxation from the present to the future.
10. The burden of the debt is borne by those who purchase government bonds.
11. The federal government budget recorded surpluses between 1998 and 2001.
12. State and local governments are usually required by state law to keep the
budgets in balance.
13. If business and personal saving are constant, then a federal budget deficit
will have no impact on national saving.
14. Other things being equal, a government surplus increases the supply of
loanable funds available for investment.
15. State revenue bonds are backed by the taxing power of state governments.
16. A federal budget surplus can lead to more credit being available for
productive activity.
22. 17. A federal budget deficit can strain credit markets forcing the real rate
of interest to decrease.
18. The U.S. deficit in the 1980s was structural in the sense that federal
spending would exceed federal revenue even at a level of full employment.
MULTIPLE CHOICE QUESTIONS
1. The outstanding federal debt will decline in value if:
a. budget deficits continue.
b. the government runs a budget surplus.
c. the market rate of interest increases.
d. either (b) or (c)
2. The federal budget has been in deficit:
a. for every year between 1970 and 1997.
b. for every year between 1950 and 1997.
c. only since 1980.
d. for every year between 1960 and 1997.
3. The high employment deficit is estimated at $100 billion. Assuming that
the economy is operating below full employment and that it will not
overheat during the year,
a. the actual budget is not in deficit.
b. increasing GDP will eliminate the deficit.
c. increasing GDP will not eliminate the deficit.
d. the actual budget is in surplus.
4. An increase in government borrowing has no effect on the willingness of
citizens to save or on the demand for credit. Increased borrowing to cover
deficits will therefore:
a. reduce interest rates.
b. increase interest rates.
c. have no effect on interest rates.
d. not require increased taxes in the future.
5. As a result of government borrowing to cover deficits, citizens increase the
supply of savings to provide themselves with funds to pay anticipated
increases in future taxes. Then it follows that increased government
borrowing will:
a. reduce private investment.
b. increase private investment.
c. have no effect of private investment.
d. increase interest rates.
e. both (a) and (d)
6. The total dollar value of the federal debt outstanding is:
a. more than 50 percent of GDP.
b. more than 100 percent of GDP.
23. c. less than 50 percent of GDP.
d. less than 10 percent of GDP.
7. The federal government, its agencies, and the Federal Reserve System:
a. are not permitted to hold outstanding federal debt.
b. hold 50 percent of the outstanding federal debt.
c. hold between 15 and 25 percent of the outstanding federal debt.
d. hold 75 percent of the outstanding federal debt.
8. The largest portion of the net federal debt outstanding is owed to:
a. foreigners.
b. U.S. citizens and companies.
c. federal government agencies.
d. state and local governments.
9. The debt of state and local governments is mostly:
a. internal.
b. external.
c. owed to citizens of other nations.
d. worthless.
10. Government borrowing will:
a. postpone taxation to the future.
b. increase government interest cost.
c. both (a) and (b)
d. eliminate taxes.
11. Which of the following is true about the federal government budget balance
in the United States?
a. The federal budget has never had a surplus.
b. The federal budget had a surplus every year from 1970 to 2008.
c. The federal budget had a surplus from 1998 until 2001.
d. The federal budget had a deficit from 1998 until 2001.
12. Which of the following can contribute to a decrease in national saving?
a. a federal budget deficit
b. an increase in the state and local government aggregate surplus
c. a federal budget surplus
d. an increase in personal saving
13. Other things being equal, a government budget surplus:
a. increases the demand for loanable funds.
b. increases the supply of loanable funds.
c. is likely to increase market equilibrium interest rates.
d. is unlikely to affect market equilibrium interest rates.
14. If the federal government runs a surplus consistently, then which of the
following is likely to occur?
a. National saving will decline.
24. b. The gross federal debt will increase.
c. The gross federal debt will decrease.
d. Market equilibrium interest rates are likely to rise as a result of the
surpluses.
15. General obligation bonds of state and local governments are:
a. backed by revenue from public facilities such as sports stadiums.
b. backed by the taxing power of state and local governments.
c. usually used to finance transfer payments.
d. usually used to finance capital expenditures.
e. both (b) and (d)
16. A bond that is backed by the tolls collected from a bridge to be constructed
from the proceeds of the bond is an example of:
a. a general obligation bond.
b. a non-obligation bond.
c. a revenue bond.
d. none of the above.
17. Evidence of “crowding out” in the market for loanable funds at a rate of 8%
could be:
a. private investors who will borrow only at a rate lower than 8%.
b. private investors who are willing to accept a rate higher than 8% for
borrowing.
c. a government surplus.
d. a social security surplus.
18. High-employment deficit or surplus is:
a. an extreme economic situation requiring emergency measures.
b. the amount of deficit or surplus available assuming current employment
levels.
c. the amount of deficit or surplus available when employment is at its
approximately full capacity.
d. the amount of deficit or surplus available when unemployment is at a
relatively high level.
19. A government’s internal debt is:
a. debt owed to other government agencies.
b. debt owed to other governments.
c. debt owed to its citizens.
d. both (a) and (c).
20. The National Income and Product Accounts budget balance reflects:
a. an inflation-adjusted budget balance less social security surplus.
b. new debt resulting from a federal budget deficit.
c. the real budget balance.
d. the nominal budget balance.
25. ECO 450 Week 9 Quiz
C H A P TER 1 3
The Theory of Income Taxation
TRUE/FALSE QUESTIONS
1. The actual federal income tax currently taxes all income irrespective of its
source or use at the same tax rate.
2. Comprehensive income excludes unrealized capital gains.
3. Under a comprehensive income tax, transfer payments received by Social
Security recipients would be fully taxable.
4. Homeowners earn rental income-in-kind from their home that would be
taxable under a comprehensive income tax.
5. A comprehensive income tax is a lump-sum tax.
6. A comprehensive income tax will result in a divergence between gross
wages paid by employers and net wages received by workers.
7. A comprehensive income tax will always reduce work effort by taxpayers.
8. The substitution effect of a tax-induced decline in wages always leads
workers to work less.
9. The market wage elasticity of labor is zero. If this is the case, the excess
burden of a tax on labor income will also be zero.
10. Points on a compensated labor supply curve are always more elastic than
points for corresponding wage levels on a regular labor supply curve.
11. Comprehensive income is the sum of annual consumption and the change in
net worth.
12. A tax on interest income does not prevent credit market from efficiently
allocating resources.
13. If an individual is subject to a 30-percent income tax, then the net interest
on a certificate of deposit yielding 5 percent would be 3.5 percent after
taxes.
14. Because a tax on interest income results in income and substitution effects,
it is not possible to predict the effect it will have on saving.
26. 15. Most empirical studies indicate that the interest elasticity of supply of
savings is close to zero.
16. Income tax became a permanent fixture in the United States starting in the
early nineteenth century.
17. The Haig-Simons definition of income is different from comprehensive
income.
18. Comprehensive income equals consumption plus the change in net worth.
MULTIPLE CHOICE QUESTIONS
1. Comprehensive income:
a. is the sum of annual consumption and realized capital gains.
b. is the sum of annual consumption and changes in net worth.
c. excludes corporation income.
d. is the sum of annual consumption and net worth.
2. A tax on labor income:
a. results only in an income effect that always decreases hours worked per
year.
b. results in a substitution effect that always decreases hours worked per
year.
c. results in an income effect that increases hours worked per year if
leisure is a normal good.
d. both (a) and (b)
e. both (b) and (c)
3. The market supply of labor is perfectly inelastic. Then it follows that:
a. the substitution effect of wage changes is zero.
b. the income effect of wage changes is zero.
c. leisure is a normal good and the income effect of wage changes exactly
offsets the substitution effect.
d. the excess burden of a tax on labor income will be zero.
4. The compensated labor supply curve:
a. will always be vertical.
b. will always be upward sloping.
c. will always be downward sloping.
d. reflects both the income and substitution effects of wage changes.
5. Using a regular labor supply curve instead of a compensated supply curve
to calculate the excess burden of a tax on labor income will:
a. result in an accurate estimate of the excess burden.
b. overestimate the excess burden.
c. underestimate the excess burden.
d. accurately estimate the excess burden only if the market supply of labor
is perfectly inelastic.
27. 6. Most empirical research indicates that the market supply curve of labor
hours by prime-age males is:
a. very elastic.
b. almost perfectly inelastic.
c. always upward sloping.
d. perfectly elastic.
7. A flat-rate tax on labor income will:
a. always reduce hours worked per year.
b. always increase hours worked per year.
c. either increase or decrease hours worked per year.
d. never have any effect on the amount of leisure hours per year.
8. A tax on interest income:
a. causes the gross interest rate paid by investors to exceed the net interest
rate received by savers.
b. will always reduce saving.
c. will always increase saving.
d. is equivalent to a lump-sum tax.
9. If the market supply curve of savings is upward sloping, a tax on interest
income will:
a. increase the amount of saving.
b. increase the market rate of interest.
c. decrease the market rate of interest.
d. have no effect on the market rate of interest.
10. If the supply of labor is perfectly inelastic, then the incidence of a payroll
tax levied entirely on employers will be:
a. borne by employers as a reduction in profits.
b. split between workers and employers.
c. paid entirely by workers.
d. shifted forward to consumers.
11. Which of the following is true about comprehensive income?
a. Only labor income is included.
b. Only capital income is included.
c. Capital gains are not included.
d. Both realized and unrealized capital gains are included.
12. Which of the following will increase a person’s comprehensive income?
a. an increase in the market value of the person’s home
b. a decrease in the value of the person’s stock portfolio
c. a decrease in labor income
d. a decrease in consumption
13. A tax on labor income will:
a. increase the net wage received by workers.
b. decrease the net wage received by workers.
28. c. cause that net wage received by workers to decline below the gross
wage paid by employers.
d. both (b) and (c)
14. If the return to savings, r, is subject to taxation at rate t, then in equilibrium
a saver’s marginal rate of time preference will equal:
a. r
b. t
c. (1 + r)
d. [1 + r(1 – t)]
15. The higher the compensated elasticity of supply of savings,
a. the lower the excess burden of a tax on capital income.
b. the higher the excess burden of a tax on capital income.
c. the higher the excess burden of a tax on labor income.
d. both (b) and (c)
16. The Haig-Simons definition of income:
a. is the sum of annual consumption and realized capital gains.
b. is the sum of annual consumption and changes in net worth.
c. excludes corporation income.
d. is the sum of annual consumption and net worth.
17 Comprehensive income:
a. includes realized capital gains, but not unrealized capital gains
b. includes both realized and unrealized capital gains.
c. excludes cash from the sale of assets.
d. excludes increases in the value of assets.
18. Income-in-kind:
a. is exemplified by nonpecuniary returns.
b. is generally non-taxable because there is no monetary transaction.
c. is generally taxable.
d. both (a) and (b).
19. An example of a nonpecuniary return is:
a. job satisfaction.
b. unemployment benefits.
c. employer contributions to a retirement plan.
d. both (b) and (c).
20. Income from labor services (wages) account for what percentage of gross
income in the U.S.?
a. 90%
b. 75%
c. 60%
d. 50%
29. C H A P TER 1 4
Taxation of Personal Income
in the United States
TRUE/FALSE QUESTIONS
1. Taxable income in the United States exceeds adjusted gross income.
2. Taxable income in the United States includes all capital gains earned,
whether or not they are realized.
3. Taxable income in the United States amounts to less than 50 percent of
personal income.
4. Tax preferences are really subsidies to certain activities.
5. A tax deduction allowed for an activity for which positive externalities are
not likely to exist (such as home ownership) is likely to cause the marginal
social cost of the activity to exceed its marginal social benefit.
6. The value of a personal exemption to a taxpayer varies with his or her
marginal tax rate.
7. The U.S. personal income tax is not a progressive tax.
8. The highest statutory marginal tax rate under the federal personal income
tax is 50 percent.
9. Under current rules, only real interest earned is subject to income tax.
10. Realized, long-term capital gains that reflect inflation are currently exempt
from taxation.
11. The tax base under the personal income tax in the United States is the Haig-
Simons definition of comprehensive income.
12. Tax credits vary with a person’s marginal tax rate.
13. The cuts in marginal tax rates initiated in 2001 are likely to reduce the
excess burden of tax preferences.
14. The earned income tax credit is a negative tax the subsidizes the earnings of
low-income workers.
15. If a progressive income tax is replaced with an equal-yield, flat-rate tax,
then work effort will unequivocally increase.
30. 16. As of 2009, there is no marriage penalty for an adjusted gross income
of $60,000.
17. Tax preferences are exclusions, exemptions, and deductions from the
tax base.
18. Income-in-kind is not considered a tax preference.
MULTIPLE CHOICE QUESTIONS
1. Adjusted gross income, as defined by the United States Tax Code,
a. exceeds taxable income.
b. equals taxable income.
c. is less than taxable income.
d. is greater than comprehensive income.
2. Tax preferences:
a. are exclusions, exemptions, and deductions from the tax base.
b. are in the tax code by accident.
c. are extra taxes on certain taxpayers.
d. increase the amount of income that is taxable.
e. both (a) and (d)
3. Currently, the tax treatment of capital gains in the United States is such that:
a. all capital gains are taxed.
b. all realized capital gains are taxed.
c. most realized capital gains are taxed.
d. only capital gains adjusted for inflation are taxed.
4. The exclusion of interest of state and local bonds from taxation by the
federal government:
a. decreases interest costs for state and local governments.
b. increases interest costs for state and local governments.
c. benefits lower-income taxpayers more than upper-income taxpayers.
d. discourages borrowing by local governments.
5. The value of personal exemptions in terms of taxes saved:
a. is the same for all taxpayers.
b. varies with family size.
c. varies with taxpayers’ marginal tax rates.
d. both (b) and (c)
6. A taxpayer is in a 33-percent tax bracket and itemizes deductions. He
obtains a mortgage from a bank at 9-percent interest. The actual rate of
interest he pays is:
a. 6 percent.
b. 9 percent.
c. 20 percent.
d. 25 percent.
31. 7. Tax expenditures are:
a. expenditures made to collect taxes.
b. losses in revenue due to tax preferences.
c. less than 1 percent of tax revenue.
d. both (b) and (c)
8. Under the federal personal income tax rules prevailing as of 2009,
a. all interest expense is tax deductible.
b. the interest expense for mortgages on first and second homes is tax
deductible.
c. the interest expense for mortgages only on first homes is tax deductible.
d. no interest is tax deductible.
9. The reduction in marginal tax rates will:
a. increase the excess burden of tax preferences.
b. increase tax expenditures.
c. decrease the excess burden of tax preferences.
d. have no effect of tax expenditures.
10. “Bracket creep” is no longer a problem in the United States because:
a. the tax brackets are indexed.
b. capital gains are now fully taxable.
c. only real interest is taxed.
d. capital gains are indexed.
11. Which of the following is true for the federal income tax in the United
States?
a. All income irrespective of its source or use is taxed at the same rate.
b. Comprehensive income is the tax base.
c. The tax base is less than 50 percent of comprehensive income.
d. All realized and unrealized capital gains are included in the tax base.
12. Because of the Earned Income Tax Credit, the effective tax rate for the
lowest-income taxpayers in the United States is:
a. only 15 percent.
b. higher than that paid by upper-income taxpayers.
c. zero.
d. negative.
13. The excess burden of tax preferences:
a. depends on average tax rates.
b. will be higher, the higher the marginal tax rate is.
c. will be lower, the higher the marginal tax rate is.
d. is independent of marginal tax rates.
14. A shift to an equal-yield, flat-rate personal income tax from the current
progressive income tax rate structure will:
a. reduce the tax burden on upper-income groups.
b. increase the tax burden on upper-income groups.
32. c. increase the share of taxes paid by lower-income groups.
d. both (a) and (c)
15. Removing savings from the tax base of the personal income tax is likely to:
a. increase work effort.
b. decrease work effort.
c. lower market equilibrium interest rates by increasing the supply of
loanable funds.
d. increase market equilibrium interest rates, thereby increasing the
demand for loanable funds.
16. Which is a justification for tax preferences?
a. administrative difficulties
b. improving equity
c. encouraging private expenditures that create external benefits
d. all of the above
17. If the excess burden from tax is $10 million, lowering marginal tax rates
should make the excess burden:
a. more than $10 million.
b. less than $10 million.
c. remain at $10 million.
d. none of the above is certain to occur
18. Which of the following is the result of The Economic Growth and Tax
Relief Reconciliation Act enacted in 2001?
a. reduction of the highest marginal tax rate
b. increased the marriage penalty
c. created a new 40% tax bracket
d. both (a) and (c)
19. As of 2009, the highest marginal tax rate is:
a. 39.6%
b. 38%
c. 35%
d. 32.5%
20. Which is an example of an itemized deduction under the U.S. code as of
2009?
a. state and local income tax
b. state and local property tax
c. all medical expenses
d. both (a) and (b)
33. C H A P TER 1 7
Taxes on Wealth,
Property, and Estates
TRUE/FALSE QUESTIONS
1. Wealth is a flow.
2. A wealth tax is equivalent to a tax on the return to saving.
3. If the supply of savings is perfectly inelastic, a comprehensive wealth tax
will increase the market rate of interest.
4. Assuming that the supply curve of savings is upward sloping, a
comprehensive wealth tax will reduce annual investment.
5. As administered in the United States, the local property tax is mainly a tax
on real estate.
6. The property tax in the United States is likely to reduce the equilibrium
return to investment.
7. The town of Oz has raised its property tax rates considerably above the
national average. Other things being equal, capital is likely to flow into Oz
in the long run because of the tax.
8. If a real estate tax causes rents to rise, it cannot be fully capitalized.
9. A tax on the value of land is likely to be fully capitalized.
10. The local property tax is likely to result in less than the efficient amount of
investment in real estate.
11. A general tax on wealth will cause efficiency loss in labor markets.
12. The local property tax, as administered in the United States, is a general tax
on wealth.
13. The local property tax in the United States will reduce the return to real
estate only in the long run.
14. Other things being equal, if the property tax rate is above the national
average for a jurisdiction, capital can be expected to flow out of the region
in that area.
15. If a local property tax increase is fully capitalized, property owners at the
time of the increase cannot shift any of the current or future tax increase to
buyers if they sell the property.
34. 16. A person who never saves any income and receives no gifts and
inheritances will never accumulate wealth.
17. Wealth taxes are a relatively new form of taxation.
18. Total wealth definitions never include intangible personal property.
MULTIPLE CHOICE QUESTIONS
1. Wealth is:
a. a flow.
b. a stock.
c. the market value of accumulated assets.
d. both (b) and (c)
2. A comprehensive wealth tax base includes:
a. all real tangible, intangible, and human wealth, less any claims against
those assets.
b. only real property.
c. only intangible assets.
d. only tangible assets.
3. If the interest elasticity of supply of savings is zero, a comprehensive wealth
tax will:
a. increase the market rate of interest.
b. reduce the income of savers.
c. reduce the income of workers.
d. both (b) and (c)
4. If the supply curve of savings is upward sloping, a comprehensive wealth
tax will:
a. increase the market rate of interest.
b. reduce the market rate of interest.
c. have zero excess burden.
d. have no effect on investment.
5. A comprehensive wealth tax will:
a. impair efficiency in labor markets.
b. impair efficiency in investment markets.
c. both (a) and (b)
d. have no excess burden.
6. Assuming that investors seek to maximize the return on their investment,
the long-run effect of a national tax on real estate will be to:
a. reduce the return to investment in real estate only.
b. reduce the return to investment in all assets.
c. reduce wages only.
d. increase the return to all investors.
35. 7. A local property tax, such as that used in the United States, is likely to:
a. increase investment in the economy.
b. cause a flow of investment among jurisdictions.
c. decrease the return to saving in all uses.
d. both (b) and (c)
8. If a property tax on real estate is capitalized,
a. the price of real estate will rise.
b. the price of real estate will fall.
c. the price of real estate will be unaffected.
d. the burden of the tax will be transferred to buyers of real estate.
e. both (b) and (d)
9. Suppose that the current market rate of interest is 10 percent. The market
rent on a parcel of land is $6,000 per year. A 10-percent land tax is
imposed. As a result of the tax, the price of the land parcel:
a. falls from $60,000 to $30,000.
b. increases from $30,000 to $60,000.
c. falls 10 percent.
d. falls 20 percent.
10. If a tax on real estate results in a decrease in the supply of housing, the tax
will be:
a. fully capitalized.
b. only partially capitalized.
c. not capitalized at all.
d. borne entirely by renters.
11. If the supply of saving is not perfectly inelastic in the nation, then which of
the following taxes will cause efficiency loss in capital markets?
a. a general wealth tax
b. a national tax on real estate
c. a consumption tax
d. both (a) and (b)
12. The local property tax in the United States is levied primarily on:
a. personal property.
b. intangible property.
c. business property.
d. real estate.
13. Which of the following would not be included in a comprehensive wealth
tax base?
a. real estate
b. personal property
c. intangible assets
d. residential rents
36. 14. If the supply of real estate is not perfectly inelastic, then the local real estate
property tax differentials:
a. cannot be shifted to tenants.
b. can be shifted to tenants through increases in rents.
c. will be fully capitalized.
d. both (a) and (c)
15. If the supply of saving is not perfectly inelastic, then substituting a value-
added tax for an equal-yield general wealth tax will:
a. decrease market equilibrium interest rates.
b. increase the efficiency loss in labor markets.
c. decrease the efficiency loss in labor markets.
d. decrease efficiency in capital markets.
e. both (a) and (b)
16. Intangible personal property includes:
a. stock in companies.
b. corporate bonds.
c. cash.
d. all of the above
17. If the annual amount of savings is $10 billion, what is the effect of a wealth
tax assuming supply is perfectly inelastic?
a. annual savings remains $10 billion
b. annual savings increases above $10 billion
c. annual savings falls below $10 billion
d. no particular effect is guaranteed to happen
18. If the annual amount of savings is $10 billion, what is the effect of a wealth
tax assuming supply is responsive?
a. annual savings remains $10 billion
b. annual savings increases above $10 billion
c. annual savings falls below $10 billion
d. no particular effect is guaranteed to happen
19. From the point of view of the locality, increasing property taxes:
a. increases the price of locally produced goods.
b. decreases income of owners of land in the associated community.
c. does not affect buyers of locally produced goods fro outside of the
community.
d. both (a) and (b)
20. Tax capitalization is:
a. a decrease in the value of a taxed asset at a level related to the
discounted value of the future tax liability.
b. partially recognized when the supply of taxed asset is perfectly inelastic.
c. only partially recognized on assets like land.
d. both (b) and (c)
37. C H A P TER 1 8
Fiscal Federalis m and State and
Local Governme nt Finance
TRUE/FALSE QUESTIONS
1. A federal system of government allows a wider diversity of preferences for
government-provided services to be accommodated when compared to
nonfederal, centralized government.
2. Income redistribution is a service likely to be most effectively administered
by the federal government.
3. Economic stabilization can be easily supplied to citizens by local
governments.
4. When each local government supplies goods and services to its citizens, the
political equilibrium in each jurisdiction corresponds to the median most-
preferred outcome of all national voters.
5. A federal system of government allows both centralized and decentralized
collective choices.
6. Local tax bases are less elastic than national tax bases.
7. Tax exporting occurs if the price of goods produced in the state and
purchased by out-of-state residents rises as a result of in-state taxes.
8. Matching categorical grants can be used to internalize interjurisdictional
positive externalities.
9. Matching grants only result in income effects.
10. A matching grant will increase local government expenditures by more than
an equal-value, general purpose grant.
11. A federal system of government only has a central government that supplies
all public goods and services.
12. According to the Tiebout model of fiscal federalism, a system of many local
governments improves the efficiency of allocation of resources to and
among public goods.
13. If a local jurisdiction’s tax base is elastic, an increase in tax rates will
decrease tax revenue.
38. 14. Taxing hotel rooms and restaurant meals in a city with lots of tourism is an
example of tax exporting.
15. Financing local schooling with the local property tax can guarantee equality
of opportunity in education.
16. According to Tiebout, individuals will self-select into communities
where the government budget best satisfies their own personal preferences.
17. Mobility between communities is not critical to the Tiebout model.
18. Interjurisdictional externalities are costs or benefits of local
government goods and services to residents in other political jurisdictions.
MULTIPLE CHOICE QUESTIONS
1. Under a federal system of government,
a. all government goods and services are supplied by a central
government.
b. all government goods and services are supplied by local governments.
c. both central and noncentral governments supply goods and services.
d. all public choices are made nationally.
2. Economic stabilization is most effectively provided by:
a. a central government.
b. state governments.
c. local governments.
d. regional governments.
3. A decentralized system of government:
a. tends to result in uniformity in the quantity and quality of government
services in all jurisdictions.
b. allows diversity in the quantity and quality of government goods and
services.
c. conducts national elections on all issues.
d. is undemocratic.
4. The political equilibrium in a local jurisdiction for a given public good
corresponds to the median most-preferred outcome of:
a. all national voters.
b. the President.
c. local voters.
d. both (a) and (c)
5. In general, local tax bases tend to be:
a. less elastic than national tax bases.
b. more elastic than national tax bases.
c. equally elastic when compared with national tax bases.
d. very inelastic.
39. 6. According to the Tiebout model of local government expenditure,
a. all local governments will supply the same kinds and amounts of
services.
b. mobile citizens respond to differences in taxes and expenditures by
moving to the jurisdiction that maximizes their well-being.
c. the average costs of government services is constant.
d. tax rates do not influence a citizen’s choice of residence.
7. A categorical grant:
a. does not restrict the use of transferred funds.
b. usually specifies the use to which the funds must be applied.
c. is used rarely in the United States.
d. is not used at all in the United States.
8. A federal highway grant will provide funds for roads supplied by state and
local governments if these governments pay 50 percent of the cost of the
roads. This grant is an example of:
a. revenue sharing.
b. a matching categorical grant.
c. a general purpose grant.
d. a nonmatching block grant.
9. A grant received by a local government will:
a. not affect the political equilibrium in that jurisdiction.
b. change the political equilibrium in that jurisdiction.
c. always increase government expenditures in the recipient jurisdiction by
the amount of grant.
d. both (b) and (c)
10. Matching grants:
a. will not increase government spending in recipient jurisdictions.
b. increase government expenditures in recipient jurisdictions more than
nonmatching grants of an equal amount.
c. increase government expenditures in recipient jurisdictions less than
nonmatching grants of an equal amount.
d. increase tax rates in recipient jurisdictions.
11. Which of the following is true about a federal system of government?
a. There is only one level of government.
b. There are several levels of government.
c. A central government directs local governments to supply all public
goods at levels determined nationally.
d. There are only local governments.
12. The central economic problem of fiscal federalism is:
a. the division of taxing and expenditure functions among different levels
of government.
b. the choice of the collective choice rule for central governments only.
c. the level of public goods to be provided by a central government only.
40. d. how to achieve an equitable distribution of income.
13. Which of the following is best supplied by local governments?
a. national defense
b. income redistribution
c. money
d. fire protection
14. Local public goods:
a. are pure public goods for the entire nation.
b. are those whose benefits are nonrival only for the population of a
particular geographical area.
c. have benefits that are subject to exclusion by pricing for local
consumers.
d. are best provided by a central government.
15. An increase in the local retail sales tax rate will increase revenue collected
by a local government:
a. if the tax base is elastic.
b. if the tax base is unit elastic.
c. if the tax base in inelastic.
d. no matter what the value of the elasticity of the tax base.
16. Which is an example of a interjurisdictional externality?
a. residential property tax
b. local sales tax
c. wage tax on all workers in a community
d. both (b) and (c)
17. Mobility:
a. is not essential to the Tiebout model.
b. can hamper a jurisdiction’s ability to raise revenues.
c. may be part of the reason for the reliance on local property taxes for the
raising of local government revenue.
d. both (b) and (c)
18. A local wage tax can:
a. create tax competition if a neighboring jurisdiction does not have such a
tax.
b. export tax onto workers in the local jurisdiction who live outside of the
local jurisdiction.
c. prevent tax competition among other local jurisdictions.
d. both (a) and (b)
19. Fiscal capacity:
a. decreases with the ability of the jurisdiction to export tax.
b. is a measure of the ability of a jurisdiction to finance government-
provided services.
c. is always enhanced by mobility.
41. d. is not dependent on the wealth of the community.
20. What is generally the best measure of fiscal capacity for local governments?
a. income per capita
b. per capita retail sales
c. assessed valuation per capita
d. per capita expenditure