Final answer:
The statement that cost depletion allows taxpayers to recover more than the cost of an asset is B) false. Cost depletion helps in recovering the investment made in a natural resource over its productive life, but does not allow recovery beyond the cost.
Step-by-step explanation:
Cost depletion does not enable the taxpayer to recover more than the cost of an asset; this statement is false. Cost depletion is a method of allocating the cost of natural resources, such as minerals, oil, and gas, over the period that they are extracted and sold. The taxpayer can only recover the actual cost of the asset through depletion deductions, and not more than that. Therefore, the main goal of cost depletion is to allow for the recovery of the investment in the asset over its productive life. Some key facts related to federal spending and revenue that can aid in understanding how cost depletion works within the broader context of government finances are:
- The federal government ran budget surpluses from 1998-2001 despite large deficits in subsequent years.
- Federal spending has grown substantially in nominal dollars, but not necessarily as a share of GDP.
- Personal income taxes form a majority of the federal government's revenue.
- Education spending is higher at the state level compared to the federal level.
- Foreign aid accounts for about 1% of federal spending, contrary to popular belief.