I had spent the last week working the Queen's case. I traveled to my
cities, interviewed my witnesses, and by the end of the investigation my
head was swimming with tax facts. I knew I had to keep the facts straight
if I were to get to the bottom of this case and figure out which tax system
How could I make sure I knew the differences between each system? By analyzing some specific tax situations.
Read through the descriptions of each type of tax, then select the correct
answers to the questions by clicking on them. If you want to change your
answers, hit Clear. When you're satisfied with all your answers, hit
In 1998, many single taxpayers are allowed a personal "exemption" of $2,650,
and a "standard deduction" of $4,150, so they can earn up to $6,800 without
incurring a Federal income tax liability. Both the personal exemption and
the standard deduction may increase in future years because of inflation.
1) If you increase the amount of income that's not subject to tax liability,
are you making the income tax more or less progressive?
A. More progressive
B. Less progressive
The Federal Insurance Contributions Act (FICA) consists of both a
Social Security (retirement) payroll tax and a Medicare (hospital insurance) tax. The
tax is levied on employers, employees, and certain self-employed individuals.
In 1998, the employee's contribution to the retirement plan part of the
FICA tax is 6.2% for the first $68,400 earned in wages and salaries. The
employee's part of the Social Security payroll tax applies only to wages,
salaries, and other personal income. (The Medicare part of the tax is
1.45% on all earned income.) People with income from interest and dividend
payments do not have to pay any Social Security tax on this income.
2) Over the wage and salary range of $0 to $68,400, was the Social Security
tax regressive, progressive, or proportional?
3) If you made more than $68,400 in earned income, would you consider the
Social Security tax regressive, progressive, or proportional?
4) If you received a lot of money from interest and dividend payments, and
didn't have to pay any Social Security tax on this money, would you
consider the Social Security tax regressive, progressive, or proportional?
A state has a 10 cents per gallon excise tax on gasoline.
* Driver A: Total income of $5,000, spends $50 on state gas tax -- 1.0% of
* Driver B: Total income of $10,000, spends $75 on state gas tax -- .75% of
* Driver C: Total income of $20,000, spends $100 on state gas tax -- .50% of
5) Is the state gasoline tax regressive, progressive, or proportional?
6) Do you think that excise taxes on such consumer products as automobile
tires, tobacco products, distilled spirits, etc., is regressive, progressive,