and address the following prompts:
21) If taxes are collected on the basis of ability-to-pay and there are two taxpayers with the same income who also are identical in all other respects, which of the following is correct?
A) Vertical equity is impossible between these two taxpayers.
B) Vertical equity exists.
C) Horizontal equity exists.
D) The tax must be proportional.
E) The fair-incidence principle is potentially being violated.
22) Suppose that Anthony and Melissa both earn $30,000 and are otherwise the same. If they both pay 10 percent of their income as taxes, then
A) the income tax is regressive.
B) the benefits principle of fairness has been achieved.
C) horizontal equity has been achieved.
D) proportional equity has been achieved.
E) vertical equity has been achieved.
23) Vertical equity is the idea that
A) taxpayers with a greater ability to pay should bear a greater share of the taxes.
B) people should pay taxes equal to the benefits they receive from public benefits.
C) as income rises, taxes should be efficient, not equitable.
D) the marriage tax is equitable.
E) taxes must be fairest to people with the largest incomes.
24) Progressive taxes can be justified as fair based on which of the following?
A) horizontal equity
B) vertical equity
C) benefits received
D) index of fairness principle
E) None of the above answers is correct.
25) The assertion that Bill Gates and Paris Hilton should pay more taxes than Average Joe best represents the idea of
A) horizontal equity.
B) vertical equity.
C) the benefits principle of tax fairness.
D) fairness principle of taxation.
E) benefits paid principle of taxation.
26) The marriage tax problem in the United States is a
A) vertical equity problem because married people pay less than similar single people.
B) horizontal equity problem because married people pay more than similar single people.
C) benefits principle problem because who benefit more pay less.
D) vertical equity problem because married people pay more than similar single people.
E) horizontal equity problem because married people pay less than similar single people.
27) The marriage tax problem in the U.S. tax code is a problem involving which of the following?
A) benefits received principle
B) the ability-to-pay principle
C) a conflict between horizontal and vertical equity
D) vertical equity
E) incidence of fairness principle
28) Trying to achieve vertical equity by using a progressive income tax structure can create problems with which of the following?
A) horizontal equity
B) vertical equity
C) benefits received
D) tax incidence
E) regressive equality
29) Which of the following taxes best illustrates the benefits principle of taxation?
A) sales tax on clothing used to fund food stamps
B) state income tax used to fund state universities
C) medicare tax imposed on all workers used to fund medical care for the elderly
D) gasoline tax used to fund road repairs
E) federal income tax used to fund NASA spending
30) The proposition that people should pay taxes according to how easily they can bear the burden is known as the ________ principle.
A) regressive tax
B) benefits
C) ability-to-pay
D) fairness
E) incidence of fairness
