Textbook Problem

What are the two most important soirees of tax revenue for the federal government? • What are the two most important sources of tax revenue for state and local governments?

To determine

The two largest sources of total revenue for the U.S. federal government.

Answer to Problem 1CQQ

Option ‘b’ is correct.

Explanation of Solution

Option (b):

Personal income tax and payroll taxes for social insurance are the two important sources of tax revenue for the U.S. federal government. Thus, option b is correct.

Option (a):

The U.S. federal government also levies corporate tax but its contribution is much smaller than that of personal income tax and payroll tax. Thus, option ‘a’ is incorrect.

Option (c):

The U.S. federal government also levies corporate tax but its contribution is much smaller than personal income tax and payroll tax. Thus, option ‘c’ is incorrect.

Option (d):

Payroll tax has the significant contribution in the U.S federal government tax revenue, while property tax is one of the important sources of tax revenue for the state and local governments and not for the U.S federal government. Hence, option ‘d’ is incorrect.

Economics Concept Introduction

Concept introduction:

Personal income tax: A tax which is levied on the incomes generated from the different sources is known as the personal income tax.

Payroll tax: This is the tax which is levied on the wages that the firms pay to their workers.

Sales tax: Sales tax is calculated as the percentage of the total amount spent on the final goods and services.

Property tax: A tax which is levied on the property owners as a percentage of the estimated value of the property is known as property tax.