Question

Which of the following is not an example of the type of tax that economists generally agree is the most important tax in the U.S. economy?

a. Medicare tax
b. sales tax
c. federal income tax
d. Social Security tax

Answer 1

The sales tax is not considered one of the most important taxes in the U.S. economy by economists, as the main federal revenues come from individual income taxes and payroll taxes, which are crucial for funding Social Security and Medicare. Hence, option b. is the correct answer.

Step-by-step explanation:

Among the options provided, the one that is not an example of the type of tax that economists generally agree is the most important in the U.S. economy is b. sales tax. The two main federal taxes that account for more than 80% of federal revenues are individual income taxes and payroll taxes, which include funds for Social Security and Medicare. Sales tax is primarily a state and local tax rather than a federal one and therefore does not constitute a major part of federal revenue.

The individual income tax is a progressive tax, meaning those with higher incomes pay a larger percentage of their income compared to lower-income earners. Payroll taxes for Medicare are considered proportional taxes, as everyone pays the same percentage regardless of income, while the payroll tax for Social Security can be regressive, as high-income earners pay a lower percentage of their income than lower earners do above a certain threshold.