18. Horizontal equity in taxation refers to the idea that people a. in unequal conditions should be treated differently. b. in equal conditions should pay equal taxes. c. should be taxed according to their ability to pay. d. should receive government benefits according to how much they have been taxed. 19. The idea that people in equal conditions should pay equal taxes is referred to as a. horizontal equity. b. vertical equity. c. the ability-to-pay principle. d. the marriage tax. 20. Two families who live in Plains GA have identical incomes. The Smiths deduct $5 000 from their taxable income for mortgage interest paid during the year. The Jones family lives in an apartment and is not eligible for a mortgage-interest deduction. This situation exemplifies a. an application of the benefits principle of taxation. b. a violation of horizontal equity. c. a violation of vertical equity. d. an application of egalitarian tax rules. 21. A tax that is higher for men than for women violates the criterion of a. horizontal equity. b. vertical equity. c. the ability-to-pay principle. d. the marriage tax. 22. One of the most difficult issues associated with trying to structure a tax policy to satisfy horizontal equity is determining a. whether or not a taxpayer falls within the highest income quintile. b. the level of transfer payments made to low-income groups. c. the source of income for taxpayers. d. what differences are relevant to a family’s ability to pay. 23. Which of the following statements is not correct? a. A gasoline tax can be an example of a benefits tax. b. A progressive tax attempts to achieve vertical equity. c. A progressive tax can be an example of the ability-to-pay principle. d. A regressive tax attempts to achieve horizontal equity. 24. Tax incidence refers to a. what product or service the tax is levied on. b. who bears the tax burden. c. what sector of the economy is most affected by the tax. d. the dollar value of the tax revenues. 25. In order to determine tax incidence one must a. consider issues of equity. b. also determine the legal liability of the tax. c. evaluate where the tax burden eventually falls. d. use the “flypaper theory” of taxation. 26. In order to construct a more complete picture of the economic burden of government across income classes economists usually a. include both tax payments as well as transfer payments received. b. focus only on the tax payments of wealthy tax payers. c. limit their analysis to taxes based on the ability-to-pay principle. d. focus their analysis on issues of tax efficiency. 27. If transfer payments are included when evaluating tax burdens then the average tax rate of the poorest quintile of taxpayers would be approximately a. negative 30 percent. b. negative 10 percent. c. positive 1 percent. d. positive 8 percent.
