Question

Creating the tax code _________ (is/is not) a duty of the Federal Reserve.

a) Is
b) Is not
c) Shared responsibility with the Treasury Department
d) Occurs only during financial crises

Answer 1

Creating the tax code is not a duty of the Federal Reserve; this responsibility lies with Congress and the tax code is administered by the IRS under the Department of the Treasury.

Step-by-step explanation:

The duty of creating the tax code is not the responsibility of the Federal Reserve. The Federal Reserve’s primary function is to regulate the banking system and ensure its stability, which is critical for protecting individuals' savings and the integrity of the financial system. This role was particularly highlighted during the 2008-2009 financial crisis. However, the authority to create and enact tax legislation falls to Congress and the tax code is administered by the Internal Revenue Service (IRS), which is a bureau of the Department of the Treasury, not the Federal Reserve.

Although the Federal Reserve played a key role in restructuring the American financial system when it was created, as noted by the involvement of Senator Nelson Aldrich in both the creation of the Federal Reserve and the authorization of a federal income tax, creating or amending the tax code is not within its duties.