Exam (elaborations)
Taxation Questions with Solutions
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Exam of 8 pages for the course taxes at taxes (Taxation)
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TaxationWarm-Up
Type your response in the box.
As you read the following paragraph, think about the purpose and idea behind the taxes
discussed. Then answer the question that follows.
Ty just received a job offer in a new city. He is married with two small children. He and
his wife go to visit the city and find a place to live. Their children will be in school in a
few years. While on the trip, they visit a beautiful public park for the kids. They
encounter one type of tax when they buy a few souvenir T-shirts: the shirts are on sale
for $10, but Ty ends up paying $11.00 after the sales tax is added. Later, they
encounter a second type of tax. When Ty and his wife meet with their real estate agent,
the agent tells them that the property taxes they will pay on their new home are higher
than the taxes on their old home. However, the agent says the government funds the
schools in the area well, and the schools are high quali - answerSAMPLE ANSWER:
Ty and his wife paid a sales tax on the T-shirts they bought. That money probably helps
fund the public park they visited. Similarly, they will pay money to the government in the
form of property taxes, and some of that money will fund the local schools.
Types of Taxes
Ty and his wife paid sales tax when they bought T-shirts, and they will pay property
taxes on their house. Let's look at the various types of taxes and the costs and benefits
of these taxes.
Taxes are inevitable because we expect the government to provide many services and
facilities. As Benjamin Franklin said, nothing is certain but death and taxes.Every
individual must pay taxes at some time in some way. But taxes have both costs and
benefits attached to them. The leakage in our income in the form of taxes is injected into
the economy through government expenditures.
The impact of taxes is not the same for every individual, however. Governments design
some taxes to have a greater impact on particular income groups while other taxes are
designed to affect everyone equally. - answer
expenditures - answerthe amount spent on purchases
Type your response in the box.
Read this scenario, and then answer the question that follows.
, Mark and Julia are two working individuals in their early 20s. They are each ready to
furnish their first apartment after college and are excited to buy new televisions for their
respective living rooms.
Mark has saved money from his $25,000 annual salary to buy a new television, and
Julia has saved money from her $100,000 annual salary for the same purpose. They
both choose the same TV, which costs $1,000. Since they buy their TVs in the same
town, they each pay 10 percent in sales tax, bringing the total cost for each TV to
$1,100.
Who feels a greater effect from the 10 percent sales tax, Mark or Julia? Why? -
answerSample Answer:
While they both pay the same amount, the tax affects Mark more because he earns
significantly less than Julia does.
debt - answerthe amount owed by a borrower to a lender
Article 1, section 8, of the Constitution - answerGives the government the right to collect
taxes. Also grants Congress the power to determine how to spend the taxes it collects.
Congress should collect taxes only for two purposes— - answerto pay its debts and to
pay for defense and the general welfare of its citizens.
Congress also has the power to levy taxes on imports. - answermust apply uniformly to
every state.
Until ______, the federal government collected only excise taxes and duty (taxes) on
imported goods. - answer1913
excise tax - answeran indirect tax levied on the production of certain goods and services
revenue - answerincome received
Excise taxes are— - answeroften included in the products price
important reason for levying excise taxes - answerreduce the consumption of specific
goods.
The federal government had incurred heavy debt during the- - answerCivil War (1861-
1865)
Sixteenth Amendment to the Constitution allowed - answerCongress to levy taxes on
people's income
_____% of the total revenue from federal, state, and local governments comes from
income taxes. - answer57%
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