Question: What impact can taxes have on the economy?

Answer: Higher taxes reduce demand because consumers have less money to spend.

Question: What is an argument against the benefit taxation principle?

Answer: People who earn less money simply cannot afford to pay for some benefits.

Question: How are payroll taxes used?

Answer: They are used for entitlement programs like Social Security.

Question: Read the sentence. Some states collect a sin tax on products like alcohol and tobacco. What outcome would a state expect when levying a sin tax?

Answer: It would expect a decrease in demand.

Question: Which is an argument against implementing a value-added tax (VAT)?

Answer: It places an unfair burden on people with lower incomes.

Question: Which is a feature of a flat tax?

Answer: It is not progressive and remains the same for all consumers.

Question: What is the purpose of the Internal Revenue Service?

Answer: It collects income taxes for the federal government.

Question: Read the statement. [Blank] of the Constitution states that the government’s collection of income taxes is legal. Which accurately completes the sentence?

Answer: Amendment XVI.

Question: How does a flat tax differ from value-added tax (VAT)?

Answer: The rate remains the same under a flat tax, whereas the rate changes under a VAT.

Question: Which advantage of a value-added tax is most likely to win Americans’ acceptance?

Answer: It is much more difficult to evade paying taxes.