SOC 185 FINAL EXAM QUESTIONS AND
ANSWERS GRADED A+ 2025/2026
What are alternative conceptions of the welfare state? - ANS - Education, employer-provided
benefits, redistribution through taxes, tax expenditures (tax breaks), income equality, full
employment, labor market regulation,litigation, equal opportunity law
- Policing and punishment — addresses poverty and unemployment by locking up poor people
- Reproductive rights (abortion)- part of health care,labor market implications
- "Corporate welfare"-farm subsidies, corporate subsidies
What are some key terms in terms of taxation? - ANS - federal taxes-$ that ppl + companies
are legally required to pay to a gov
- income tax-tax on income, but corporate income tax is tax on corporate profits that has its
own set of tax rates and deductions + credits
- federal payroll tax-special kind of income tax that is only based on labor income (not
investments); main one in America is FICA (Federal Insurance Contributions Act) where part is
paid by employers and part by employees (social security, medicare)
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,- Withholding-amt of an employee's pay withheld by the employer + sent directly to the gov as
partial payment of income tax
- Refund-you withheld more than you owe
- Exclusions—not included in gross income (excluded from income before calculating taxes):
employer-provided Health Insurance Benefits; Retirement contributions (401K, 403B, IRA);
Employer Retirement Benefits
- Deductions-deducted from gross income:
standard - single or married filing separately; married filing jointly
itemized - mortgage interest of $750,000 or less • Charitable contributions • Medical and dental
expenses (over 7.5% of AGI) • State and local income, sales, and personal property taxes up to
$10,000 • Gambling losses • $2,500 in student loan interest, income phaseout limits
- home mortgage interest deduction:
• Deduction of interest on home loans (homes<$1M) • Only benefits ppl who own homes +
gives more benefit to ppl w/ expensive homes + high tax rates • Raises housing prices—pricing
some ppl out of market • ^ wealth inequality by class+race and wealth is often transferred
intergenerationally
- Credits-deducted from tax bill:
Earned Income Tax Credit • American Opportunity Tax Credit • Lifetime Learning Credit • Child
Tax Credit ($2,000)
- Refundable credit—if credit is more than what you owe, you receive the money (Child tax
credit, Earned Income Tax Credit)
What is an effective tax rate? - ANS average rate of tax an individual or a corporation actually
pays on their total taxable income
after deductions and credits; adding up taxes at each marginal rate
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,What is investment income vs wage income? - ANS Investment income - Money generated
from owning assets (e.g., interest, dividends, capital gains from selling assets like stocks or real
estate); Long term (1 yr hold) capital gains (2021):
• 0%--$80,000 or lower income
• 20%--$501,000 or higher
• 15%--everyone else
Wage income - Money earned from active work; top marginal rate—37% (2024):
• Romneys-13% effective rate on $22 million
• Obamas--20% effective rate on $790,000
Who doesn't pay federal taxes? - ANS Includes anyone with income below standard
deduction (47%): elderly, some veterans, poor and disabled
BUT
Essentially everyone pays state and local sales taxes. Everyone directly or indirectly pays
property taxes and gasoline taxes. What's more, everyone with a job pays payroll taxes on their
income.
What is visibility and popularity in terms of taxation? - ANS Visibility:
• Income tax—withholding makes less visible • Sales tax—less visible because paid in small
amounts • Property tax— less visible when folded into mortgage payments instead of paid in
lump sum • Payroll taxes—less visible, employer amount is actually coming from employee •
Corporate tax—some of tax on corporations is passed on to consumers
Popularity:
• Most popular— ex: tax on cigarettes that is earmarked for children's health care (also
smokers are not popular)
3 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, What is progressivity? - ANS READING!!!
Progressive—rich pay higher percent of income (income tax)
- In US: Progressivity of income, corporate and property taxes is offset by regressivity of payroll,
sales and excise taxes; System as a whole is mildly progressive
Regressive—poor pay higher percent of income (sales tax)
- bottom fifth with an average income of $18,400 pay abt 16% of income in taxes + 4% in fed
taxes
- middle fifth w/ ave income of $42,900 pay abt 14% income + 11% more to state + local gov
- top 1% w/ abt $762,000 as married couple pay abt 8% in state + local taxes + 30% in fed
income and payroll charges
- top 1% but make much of income from sources other than annual salaries pay MUCH less in
taxes than middle fifth and other 1%
What are tax expenditures and what are some examples?
a. Why are they unequal?
b. What are the tax expenditure coalitions? - ANS READING!!!
Tax expenditures (Tax breaks) include tax credits, exclusions from taxation, deferrals of tax
liability, and preferential tax rates. The U.S. government uses all these options to play favorites
among taxpayers (state governments do the same). For example, capital gains from investments
are often taxed at a lower rate than wage and salary income. The tax code has long favored
homeowners over renters.
Benefits and expenditure:
a. health insurance (medicare, medicaid): Employer-provided health insurance not taxed, ACA
tax credit for purchasing private insurance
b. aid to poor (food stamps, TANF, cash benefits): Earned Income Tax Credit— reduced taxes for
low-income workers
c. old-age pensions (social security): IRA and 401K--Employer and personal contributions to
retirement accounts not taxed
4 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
ANSWERS GRADED A+ 2025/2026
What are alternative conceptions of the welfare state? - ANS - Education, employer-provided
benefits, redistribution through taxes, tax expenditures (tax breaks), income equality, full
employment, labor market regulation,litigation, equal opportunity law
- Policing and punishment — addresses poverty and unemployment by locking up poor people
- Reproductive rights (abortion)- part of health care,labor market implications
- "Corporate welfare"-farm subsidies, corporate subsidies
What are some key terms in terms of taxation? - ANS - federal taxes-$ that ppl + companies
are legally required to pay to a gov
- income tax-tax on income, but corporate income tax is tax on corporate profits that has its
own set of tax rates and deductions + credits
- federal payroll tax-special kind of income tax that is only based on labor income (not
investments); main one in America is FICA (Federal Insurance Contributions Act) where part is
paid by employers and part by employees (social security, medicare)
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,- Withholding-amt of an employee's pay withheld by the employer + sent directly to the gov as
partial payment of income tax
- Refund-you withheld more than you owe
- Exclusions—not included in gross income (excluded from income before calculating taxes):
employer-provided Health Insurance Benefits; Retirement contributions (401K, 403B, IRA);
Employer Retirement Benefits
- Deductions-deducted from gross income:
standard - single or married filing separately; married filing jointly
itemized - mortgage interest of $750,000 or less • Charitable contributions • Medical and dental
expenses (over 7.5% of AGI) • State and local income, sales, and personal property taxes up to
$10,000 • Gambling losses • $2,500 in student loan interest, income phaseout limits
- home mortgage interest deduction:
• Deduction of interest on home loans (homes<$1M) • Only benefits ppl who own homes +
gives more benefit to ppl w/ expensive homes + high tax rates • Raises housing prices—pricing
some ppl out of market • ^ wealth inequality by class+race and wealth is often transferred
intergenerationally
- Credits-deducted from tax bill:
Earned Income Tax Credit • American Opportunity Tax Credit • Lifetime Learning Credit • Child
Tax Credit ($2,000)
- Refundable credit—if credit is more than what you owe, you receive the money (Child tax
credit, Earned Income Tax Credit)
What is an effective tax rate? - ANS average rate of tax an individual or a corporation actually
pays on their total taxable income
after deductions and credits; adding up taxes at each marginal rate
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,What is investment income vs wage income? - ANS Investment income - Money generated
from owning assets (e.g., interest, dividends, capital gains from selling assets like stocks or real
estate); Long term (1 yr hold) capital gains (2021):
• 0%--$80,000 or lower income
• 20%--$501,000 or higher
• 15%--everyone else
Wage income - Money earned from active work; top marginal rate—37% (2024):
• Romneys-13% effective rate on $22 million
• Obamas--20% effective rate on $790,000
Who doesn't pay federal taxes? - ANS Includes anyone with income below standard
deduction (47%): elderly, some veterans, poor and disabled
BUT
Essentially everyone pays state and local sales taxes. Everyone directly or indirectly pays
property taxes and gasoline taxes. What's more, everyone with a job pays payroll taxes on their
income.
What is visibility and popularity in terms of taxation? - ANS Visibility:
• Income tax—withholding makes less visible • Sales tax—less visible because paid in small
amounts • Property tax— less visible when folded into mortgage payments instead of paid in
lump sum • Payroll taxes—less visible, employer amount is actually coming from employee •
Corporate tax—some of tax on corporations is passed on to consumers
Popularity:
• Most popular— ex: tax on cigarettes that is earmarked for children's health care (also
smokers are not popular)
3 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, What is progressivity? - ANS READING!!!
Progressive—rich pay higher percent of income (income tax)
- In US: Progressivity of income, corporate and property taxes is offset by regressivity of payroll,
sales and excise taxes; System as a whole is mildly progressive
Regressive—poor pay higher percent of income (sales tax)
- bottom fifth with an average income of $18,400 pay abt 16% of income in taxes + 4% in fed
taxes
- middle fifth w/ ave income of $42,900 pay abt 14% income + 11% more to state + local gov
- top 1% w/ abt $762,000 as married couple pay abt 8% in state + local taxes + 30% in fed
income and payroll charges
- top 1% but make much of income from sources other than annual salaries pay MUCH less in
taxes than middle fifth and other 1%
What are tax expenditures and what are some examples?
a. Why are they unequal?
b. What are the tax expenditure coalitions? - ANS READING!!!
Tax expenditures (Tax breaks) include tax credits, exclusions from taxation, deferrals of tax
liability, and preferential tax rates. The U.S. government uses all these options to play favorites
among taxpayers (state governments do the same). For example, capital gains from investments
are often taxed at a lower rate than wage and salary income. The tax code has long favored
homeowners over renters.
Benefits and expenditure:
a. health insurance (medicare, medicaid): Employer-provided health insurance not taxed, ACA
tax credit for purchasing private insurance
b. aid to poor (food stamps, TANF, cash benefits): Earned Income Tax Credit— reduced taxes for
low-income workers
c. old-age pensions (social security): IRA and 401K--Employer and personal contributions to
retirement accounts not taxed
4 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
