2017 Tax Quiz

Before the creation of the income tax, how did the U.S. government generate revenue to pay its expenses?

Before the creation of the income tax, how did the U.S. government generate revenue to pay its expenses?

A. Taxes – on business income
B. Tariffs – on foreign imports
C. Plunder – from assets seized during war
D. Inflation – printing money to pay its debts

Answer
b. Tariffs on foreign imports. Before the 16th Amendment that made the collection of income taxes official, the U.S. federal government was mainly funded through taxes on foreign imports, called tariffs.

How much of the federal government’s current revenue comes from individual income taxes?

A. Less than 10 percent
B. About half
C. About 90 percent
D. Nearly all of it

Answer
b. About half. In the 2015 tax year, 47 percent of federal government revenue came from individual income taxes. Payroll taxes paid by employers and employees for Medicare and Social Security made up 33 percent and corporate income taxes made up 11 percent. The remainder was miscellaneous other taxes including excise, estate, and gift taxes.

1987 marked the first year the IRS required taxpayers to report their dependents’ Social Security numbers on their tax returns. The result was many children magically “disappeared” compared with those claimed in 1986. How many dependents evaporated into thin air after this law change?

A. more than 1 million
B. 1 to 2 million
C. 3 to 4 million
D. 5 to 6 million
E. more than 7 million

Answer
e. More than 7 million. These disappearing dependents put an exclamation point on an epidemic of tax cheating.

Many U.S. corporations consider moving their headquarters overseas to save money on taxes. What is the highest marginal tax rate charged to corporations in the United States?

A. 12.5%
B. 20.6%
C. 30%
D. 38.9%
E. 55%

Answer
d. The 38.9% U.S. marginal corporate tax rate is the third highest in the world according to the Tax Foundation. The difference between U.S. tax rates and rates in other countries (e.g. Ireland at 12.5%) puts corporations in a no-win position. Either face shareholder wrath and potential lawsuits for overpaying income tax, or feel the wrath of consumers and political pundits for moving the corporation overseas to save money.

Which two places have a higher corporate tax rate than the United States?

Answer
A: Puerto Rico (39%) and Saudi Arabia (55%)