Budget, Finances, and Policy Test Bank Chapter.13 3e

Chapter 13

Test Bank

Type: multiple choice question

Title: Chapter 13 Question 01, Objective 13.1

1) The income a state receives from taxes, fees, and other sources is known as

Feedback: conceptual

a. syndicated income.

b. expenditures.

c. revenue.

d. allotments.

Type: multiple choice question

Title: Chapter 13 Question 02, Objective 13.1

2) Texas lacks _______ tax.

Feedback: factual

a. a franchise

b. a gas

c. sales

d. income

Type: multiple choice question

Title: Chapter 13 Question 03, Objective 13.1, Objective 13.1

3) The _______ is the state’s largest single source of tax income.

Feedback: factual

a. income tax

b. property tax

c. sales tax

d. municipal bond

Type: multiple choice question

Title: Chapter 13 Question 04, Objective 13.1

4) Which of the following is NOT an argument for increasing the gas tax?

Feedback: factual

a. Modern cars cause more wear and tear on roads.

b. Fuel economy has gone up.

c. The cost of construction supplies has gone up.

d. The cost of labor has gone up.

Type: multiple choice question

Title: Chapter 13 Question 05, Objective 13.1

5) A tax that extracts a larger percentage of the earnings of low-income persons than that of high-income persons is

Feedback: conceptual

a. an allocative tax.

b. a grandfather tax.

c. a regressive tax.

d. a progressive tax.

Type: multiple choice question

Title: Chapter 13 Question 06, Objective 13.1

6) The process by which local governments set the value of a piece of property for tax purposes is called

Feedback: conceptual

a. valuation.

b. gouging.

c. price-shopping.

d. appraisal.

Type: multiple choice question

Title: Chapter 13 Question 07, Objective 13.1

7) State taxes levied on alcohol and tobacco are known as

Feedback: conceptual

a. deviance taxes.

b. morality taxes.

c. sin taxes.

d. party taxes.

Type: multiple choice question

Title: Chapter 13 Question 08, Objective 13.1

8) When there is an economic downturn, sales tax collections

Feedback: applied

a. fall.

b. are stopped.

c. rise.

d. plateau.

Type: multiple choice question

Title: Chapter 13 Question 09, Objective 13.2

9) When you renew your license plates you must pay _______ to the state.

Feedback: applied

a. extortion

b. a bribe

c. a fine

d. a fee

Type: multiple choice question

Title: Chapter 13 Question 10, Objective 13.1

10) The sales tax is considered to be a

Feedback: applied

a. property tax.

b. regressive tax.

c. grandfather tax.

d. progressive tax.

Type: multiple choice question

Title: Chapter 13 Question 11, Objective 13.2

11) When you get a speeding ticket you must pay _______ to the state.

Feedback: applied

a. extortion

b. a bribe

c. a fine

d. a fee

Type: multiple choice question

Title: Chapter 13 Question 12, Objective 13.1

12) School districts are primarily funded by

Feedback: factual

a. sales taxes.

b. property taxes.

c. ticket revenue at high school football games.

d. gas taxes.

Type: multiple choice question

Title: Chapter 13 Question 13, Objective 13.1

13) Why might someone argue their home is worth less than the value the state assesses?

Feedback: applied

a. Higher assessments require service in the city government.

b. A lower assessment increases the number of scholarships you’re eligible for.

c. A lower assessment makes you eligible for government money for renovations.

d. A lower assessment means less in property taxes.

Type: multiple choice question

Title: Chapter 13 Question 14, Objective 13.1

14) Which group is not eligible for an exemption in property taxes?

Feedback: factual

a. First responders

b. Veterans

c. Senior citizens

d. Disabled persons

Type: multiple choice question

Title: Chapter 13 Question 15, Objective 13.1

15) The _______ taxes corporations 0.5–1% of their total revenue

Feedback: conceptual

a. franchise tax

b. income tax

c. corporate tax

d. big business tax

Type: multiple choice question

Title: Chapter 13 Question 16, Objective 13.1

16) Compared to other states, Texas’ property taxes are quite high. Why is this?

Feedback: applied

a. Texas has a lot of really desirable property.

b. Texas is so vast that it requires more money to run.

c. Texas lacks an income tax.

d. Texas believes everyone should contribute to helping others via taxes.

Type: multiple choice question

Title: Chapter 13 Question 17, Objective 13.1

17) Property taxes are assessed based upon the

Feedback: factual

a. length of ownership of the property being taxed.

b. value of the property the taxpayer owns.

c. net value of the owner.

d. number of children in a family.

Type: multiple choice question

Title: Chapter 13 Question 18, Objective 13.1

18) A property is valued at $100,000, but the property owner only has to pay taxes on $75,000. Why is this?

Feedback: applied

a. The property is likely located in one of the state’s tax havens.

b. The homestead exemption applies.

c. The property assessor undervalued the property.

d. The low-tax exemption applies.

Type: multiple choice question

Title: Chapter 13 Question 19, Objective 13.1

19) In addition to the homestead exemption, some might someone get an additional tax exemption by being a

Feedback: factual

a. friend of the governor.

b. business owner.

c. veteran.

d. college graduate.

Type: multiple choice question

Title: Chapter 13 Question 20, Objective 13.1

20) During the covid-19 pandemic, more people stayed home and fewer people traveled. This resulted in less gasoline sales. What impact did this have on the gas tax?

Feedback: applied

a. It increased revenues.

b. It lowered revenues.

c. It forced the state to charge more at the pump.

d. The state suspended the gas tax to get more people to drive.

Type: multiple choice question

Title: Chapter 13 Question 21, Objective 13.1

21) If you own a house worth $200,000, you will pay more in income property taxes than if your house is worth $100,000. This is because the property tax is a(n) _______ tax.

Feedback: applied

a. variable

b. popular

c. ex post facto

d. ad valorum

Type: multiple choice question

Title: Chapter 13 Question 22, Objective 13.1

22) Which taxes apply the same to everyone, regardless of income?

Feedback: factual

a. Progressive taxes

b. Regressive taxes

c. Fair taxes

d. Tyrannical taxes

Type: multiple choice question

Title: Chapter 13 Question 23, Objective 13.1

23) The oil and natural gas tax is also known as the _______ tax

Feedback: factual

a. resource

b. west Texas

c. fossil

d. severance

Type: multiple choice question

Title: Chapter 13 Question 24, Objective 13.1

24) The sales tax is higher in some counties than in others. Why is this?

Feedback: applied

a. Counties can add up to 2% to the base sales tax rate.

b. The state often punishes counties with higher sales tax rates.

c. When a county gets road improvements they must pay for it via a higher sales tax.

d. When schools perform poorly, the state raises the sales tax in that county to improve the school.

Type: multiple choice question

Title: Chapter 13 Question 25, Objective 13.1

25) The gas tax funds road construction and

Feedback: factual

a. state parks.

b. schools.

c. police.

d. sports stadiums.

Type: multiple choice question

Title: Chapter 13 Question 26, Objective 13.1

26) Taxes imposed on the sale of alcohol and tobacco and on some forms of gambling, and fees imposed on “sexually oriented” businesses, are called

Feedback: conceptual

a. sales taxes.

b. gas taxes.

c. “sin” taxes.

d. franchise taxes.

Type: multiple choice question

Title: Chapter 13 Question 27, Objective 13.1

27) Raising taxes is always unpopular. What form of tax do voters object the least to raising?

Feedback: factual

a. Gas

b. Property

c. Income

d. Sin

Type: multiple choice question

Title: Chapter 13 Question 28, Objective 13.1

28) When the price of oil falls, Texas

Feedback: applied

a. produces more oil to make up for the difference.

b. sees its revenues increase.

c. sees no change in revenue, all of the oil has been presold.

d. sees its revenue decrease.

Type: multiple choice question

Title: Chapter 13 Question 29, Objective 13.2

29) Texas maintains the _______ for fiscal emergencies.

Feedback: conceptual

a. Rainy Day Fund

b. Governor’s Discretionary Fund

c. Legislative Bank

d. County Land Bank

Type: multiple choice question

Title: Chapter 13 Question 30, Objective 13.2

30) Why are Texans so opposed to the income tax?

Feedback: applied

a. Income taxes are already high.

b. It runs against the state’s political culture.

c. It would expand the size of the state bureaucracy.

d. Doing taxes would take twice as long.

Type: multiple choice question

Title: Chapter 13 Question 31, Objective 13.2

31) Which type of tax provides the most stable funding source during an economic downturn?

Feedback: applied

a. Franchise tax

b. Gas tax

c. Sales tax

d. Income tax

Type: multiple choice question

Title: Chapter 13 Question 32, Objective 13.2

32) The tax Texans dislike the most is the _______ tax.

Feedback: factual

a. property

b. sin

c. margins

d. sales

Type: multiple choice question

Title: Chapter 13 Question 33, Objective 13.2

33) Which group generally likes taxes the least?

Feedback: factual

a. Republicans

b. Democrats

c. Younger people

d. Religious people

Type: multiple choice question

Title: Chapter 13 Question 34, Objective 13.2

34) A payment for a service rendered is referred to as

Feedback: conceptual

a. a fee.

b. a fine.

c. a tax.

d. a settlement.

Type: multiple choice question

Title: Chapter 13 Question 35, Objective 13.3

35) Every bill must contain _______ that estimates how much the bill will generate or cost if passed.

Feedback: conceptual

a. a fiscal note.

b. an appropriations bill.

c. a budget bill.

d. a pay-as-you go document.

Type: multiple choice question

Title: Chapter 13 Question 36, Objective 13.3

36) The state comptroller provides _______ at the beginning of each regular session.

Feedback: conceptual

a. a biennial revenue estimate

b. a fiscal note

c. an appropriations summary

d. a budget request

Type: multiple choice question

Title: Chapter 13 Question 37, Objective 13.3

37) Legislation that specifies what spending the state will undertake is referred to as

Feedback: conceptual

a. a biennial revenue estimate (BRE).

b. a fiscal note.

c. an appropriations bill.

d. a budget request.

Type: multiple choice question

Title: Chapter 13 Question 38, Objective 13.3

38) The state comptroller reviews the budget to _______ that the anticipated revenue will be sufficient to cover the appropriations.

Feedback: conceptual

a. analyze

b. submit

c. evaluate

d. certify

Type: multiple choice question

Title: Chapter 13 Question 39, Objective 13.3

39) Texas uses a _______, in which the legislative branch and the executive branch coordinate to propose, shape, and pass a biennial budget.

Feedback: conceptual

a. governor-led budgeting process

b. multimember budgeting process

c. dual budgeting process

d. legislature-led budgeting process

Type: multiple choice question

Title: Chapter 13 Question 40, Objective 13.3

40) One budget trick that legislators use to “make room” for increased spending is the use of

Feedback: conceptual

a. deferrals.

b. referendums.

c. debts.

d. dual budgets.

Type: multiple choice question

Title: Chapter 13 Question 41, Objective 13.3

41) When the state takes in revenue, it is first held in _______ before being allocated for its specific purpose.

Feedback: conceptual

a. the Permanent School Fund

b. the Governor’s Discretionary Fund

c. general revenue funds

d. the Legislative Bank

Type: multiple choice question

Title: Chapter 13 Question 42, Objective 13.3

42) The total amount of money the state can spend is called

Feedback: conceptual

a. expenditures.

b. revenue.

c. gross income.

d. spending power.

Type: multiple choice question

Title: Chapter 13 Question 43, Objective 13.3

43) Mistrust of executive power led the framers of the 1876 Constitution to institute a budget process where the governor

Feedback: conceptual

a. has total control over the process.

b. is completely shut out of the process.

c. must work with the legislature.

d. must work with the county judges.

Type: multiple choice question

Title: Chapter 13 Question 44, Objective 13.3

44) The budget bill contains directives telling agencies how to collect and spend funds. These are called

Feedback: conceptual

a. riders.

b. reminders.

c. specifications.

d. regulations.

Type: multiple choice question

Title: Chapter 13 Question 45, Objective 13.3

45) The legislature would like to pass a bill, but doesn’t have the funds to pay for it right now. How can they still pass it?

Feedback: applied

a. By running a deficit

b. By using a deferral

c. By asking Congress to print more money

d. By writing a bad check

Type: multiple choice question

Title: Chapter 13 Question 46, Objective 13.3

46) Before the governor can sign the budget (appropriations) bill, it must be certified by the

Feedback: applied

a. comptroller.

b. lieutenant governor.

c. secretary of the treasury.

d. secretary of state.

Type: multiple choice question

Title: Chapter 13 Question 47, Objective 13.3

47) The Legislative Budget Board (LBB) works with the _______ to prepare the budget.

Feedback: factual

a. budget director

b. governor

c. county judges

d. mayors

Type: multiple choice question

Title: Chapter 13 Question 48, Objective 13.3

48) The llegislature passes budgets for two fiscal years at a time. Why is this?

Feedback: applied

a. It is more efficient to pass two at a time.

b. The legislature only meets every other year.

c. The budget process is complicated, so they just want to get it over with.

d. One year the legislature focuses on the budget; the other year it focuses on other legislation.

Type: multiple choice question

Title: Chapter 13 Question 49, Objective 13.3

49) The budget rule that states that Texas cannot spend more money than it receives in revenue is known as

Feedback: conceptual

a. the “pay as you go” rule.

b. the expenditure rule.

c. budget diversification.

d. the general revenue allocation rule.

Type: essay/short answer question

Title: Chapter 13 Question 50, Objective 13.1

50) How does Texas bring in revenue?

Feedback:

The state receives revenue from taxes, fees, and other sources.

Type: essay/short answer question

Title: Chapter 13 Question 51, Objective 13.1

51) Explain the significance of the sales tax.

Feedback:

Since 1967, the sales tax has served as the state’s largest single source of tax income. The state sets the rate at 6.25 percent and local government can add up to 2 percent to this (most of which do).

Type: essay/short answer question

Title: Chapter 13 Question 52, Objective 13.1

52) What is a regressive tax?

Feedback:

A tax that exacts a larger percentage of the earnings of low-income than of high-income individuals.

Type: essay/short answer question

Title: Chapter 13 Question 53, Objective 13.1

53) Describe property taxes in Texas.

Feedback:

Property taxes (called ad valorem, meaning “according to value”) are assessed based upon the value of the property the taxpayer owns.

Although the state outlawed state-based property taxes in 1982, local governments use property tax revenue to fund schools, utility systems, fire and police protection, public libraries, parks, and other services.

Most of the revenue from property taxes supports public schools and the state kicks in the rest.

Type: essay/short answer question

Title: Chapter 13 Question 54, Objective 13.1

54) What are “sin” taxes in Texas?

Feedback:

Taxes imposed on the sale of alcohol and tobacco and on some forms of gambling, and fees imposed on “sexually oriented” businesses.

Type: essay/short answer question

Title: Chapter 13 Question 55, Objective 13.2

55) Which taxes do Texans like the least?

Feedback:

Property taxes

Type: essay/short answer question

Title: Chapter 13 Question 56, Objective 13.3

56) What is the “pay as you go” system?

Feedback:

Texas is constitutionally required to balance its budget. This is because Texas is a “pay as you go” state, meaning the government cannot spend more money than it receives in revenue.

Type: essay/short answer question

Title: Chapter 13 Question 57, Objective 13.3

57) What is the dual budgeting process in Texas?

Feedback:

The legislative branch and executive branch coordinate to propose, shape, and pass a biennial budget.

Type: essay/short answer question

Title: Chapter 13 Question 58, Objective 13.1

58) Explain the two taxes that Texas relies on most heavily for state revenue.

Feedback:

Texas is a two-tax state: most revenue comes from property taxes (45 percent), which funds local governments, followed by sales taxes (27 percent) used by the state.

Since 1967, the sales tax has served as the state’s largest single source of tax income. The state sets the rate at 6.25 percent and local government can add up to 2 percent to this (most of which do). These base funds are collected for use by the state, while the extra sales tax funds are returned to cities by the comptroller for city projects and programs.

Sales tax is a regressive tax because the tax rate is the same for everyone.

Property taxes are collected primarily by school districts (25 percent) but cities, counties, and special districts also levy small amounts.

Type: essay/short answer question

Title: Chapter 13 Question 59, Objective 13.1

59) Make an argument for why Texas avoids the use of the income tax. Do you think this is good for Texas?

Feedback:

The concept of income tax runs against the grain of the individualistic political culture that most Texans embrace.

It is a progressive tax: the more a person earns, the more a person pays.

A progressive tax theoretically takes a larger percentage of income from someone earning more money than someone earning less money—this is based on a concept of “ability to pay.” So, from one perspective, income taxes punish those who make more money.

Type: essay/short answer question

Title: Chapter 13 Question 60, Objective 13.2

60) Other than sales and property taxes, what are sources of revenue for the state of Texas? Discuss whether there are restrictions on what these funds can be spent.

Feedback:

Franchise (business) taxes: 6.5% of the total tax receipts in 2017. This is a 0.5–1% tax for all corporations, partnerships, business trusts, LLCs, and other businesses (not paid by most small businesses and nonprofits). Usually used to shore up budget shortfalls.

Oil and Gas taxes: 4.2% of tax revenue. Not a stable source of revenue as they can be altered by international events, technology, and natural occurrences. No increases since 1951 due to friendly relationship with oil and energy sector.

Car taxes: $3.5 billion in revenue and static at 20 cents per gallon. Made up 9% of revenue in 2015. Needs to be increased to keep pace with increased costs of building and maintaining roads (15 cents per gallon), but no one has stomach for it. Remaining 5 cents per gallon goes to education.

Sin taxes are imposed on the sale of alcohol, tobacco, and some forms of gambling, and a fee is imposed for “sexually oriented businesses.” Account for 5.5% of total revenue in 2017. Raised countless times since 2000 because it is “easier to swallow.”

Fines and fees: $11 billion in fines paid in 2017, $3.4 billion in fines levied in last decade, but only half paid.

Type: essay/short answer question

Title: Chapter 13 Question 61, Objective 13.2

61) Explain the reasons behind the Rainy Day Fund and it’s current state.

Feedback:

After 1983 economic recession, in 1988 voters approved the establishment of the Economic Stabilization Fund‑the “Rainy Day Fund.”

Revenue from oil and natural gas production goes into the fund, as well as any surplus funds and interest on the fund.

Texas puts a large percentage of per capital state expenditure into fund (third only after Wyoming and Alaska).

Fund has lots of money—over $11 billion.

Badge of honor for politicians not to touch fund.

Many argue transportation and education would be better use of funds.

In 2015, voters diverted half of what would go into ESF into State Highway Fund.

Type: essay/short answer question

Title: Chapter 13 Question 62, Objective 13.3

62) Explain the basics of the budget making process in Texas.

Feedback:

Texas is constitutionally required to balance its budget. This is because Texas is a “pay as you go” state, meaning the government cannot spend more money than it receives in revenue.

The most significant restraining rule is the spending cap, which restricts budget growth from the previous biennial budget to the estimated growth of Texas economy. The Legislative Budget Board (LBB) estimated the growth between 2014 and 2015 at 11.68 percent, giving legislators $94 billion to work with.

Texas uses a dual budgeting process, in which the legislative branch and executive branch coordinate to propose, shape, and pass a biennial budget.