Explain the purpose of payroll taxes. Is it a proportional form of tax?
The payroll tax is a tax levied on the earnings from work. It is levied at a fixed percentage of the earning, and shared equally between employees and employers, the proceeds of which are earmarked to be paid into various "trust funds." These funds, in turn, are used mainly to pay for Social Security, Medicare, and unemployment benefits.
On the surface, this tax seems to be proportional, but it is actually highly regressive, for two reasons. First, only wages and salaries are subject to the tax; interest and dividends are not. Second, because Social Security benefits are subject to upper limits, earnings above a certain level are exempted from the Social Security tax. Above this limit, the marginal payroll tax rate is zero.
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When studying human behavior, economists assume rational self-interest. This means that people
A. always make the right decisions. B. make decisions based on some desired outcome. C. are quite selfish and are not concerned about others. D. have all the information they need to make a decision.
The primary source of revenue for the federal government of the United States are taxes tied to ________
A) property values B) rents and dividends C) export and import flows D) income
If income is distributed equally in a society, the poorest fifth of the population receives
a. 5 percent of the total income. b. one-fifth as much as the richest fifth of the population. c. 20 percent of society's total income. d. 50 percent of society's total income.
Suppose that the demand for electricity has been found to be price inelastic. The most likely explanation for this finding is that:
A. few substitutes for electricity exist. B. electricity is sold in a monopoly market. C. electricity is a luxury good. D. the fraction of income spent on electricity is large.