Deck 8: Taxation: Criteria for Evaluating Revenue Options

Question 1

Governments in the United States use a broad portfolio of taxes. Not all levels use the same taxes to the same degree. Which of the following statements is not correct?

A) At least some local governments in every state levy a property tax.
B) Most, but not all, states levy a sales tax on all retail purchases or sales of tangible personal property, except transactions specifically exempt.
C) The doctrine of pre-emption dictates that, if the federal government taxes a particular commodity, states are not permitted to tax the commodity without specific federal authorization.
D) Most, but not all, states levy both individual and corporate income taxes.

Answer 1

no t The doctrine of pre-emption dictates that, if the federal government taxes a particular commodity, states are permitted to tax the commodity without specific federal authorization

Question 2

Which of the following is most crucial in determining behavior changes that can cause losses in efficiency?

A) the marginal tax rate
B) the average tax rate
C) the degree of progressivity
D) the number of tax brackets

Answer 2

the marginal tax rate

Question 3

For a taxpayer passive tax, the total collection costs of the tax:

A) will be directed to ensure voluntary compliance by larger taxpayers.
B) will be almost entirely administrative cost.
C) will include substantial cost for non-governmental representatives of the taxpayer.
D) will be zero if the taxpayer is fully passive.

Answer 3

will include substantial cost for non-governmental representatives of the taxpayer

Question 4

In a regressive tax rate structure:

A) the average tax rate is lower than the marginal tax rate.
B) the average tax rate increases with the size of the tax base.
C) the average tax rate decreases as the size of the tax base increases.
D) the average tax rate does not vary with the size of the tax base.

Question 5

The concept of vertical equity states that:

A) equals should be treated equally in a tax system.
B) unequals should be treated equally in a tax system.
C) equals should be treated unequally in a tax system.
D) unequals should be treated unequally in a tax system.

Question 6

Which of the following is correct?

A) More than 25 percent of collections will result from direct enforcement audit, delinquency control, etC)) action for the federal individual income tax.
B) Administration costs will be substantially greater than compliance costs for typical individual income taxes.
C) Compliance costs will be substantially greater than collection costs for real property taxes.
D) The U.S. real property taxes are one example of a taxpayer passive tax.

Question 7

Excluding any legislated changes in statutory tax rates, for which tax base would one expect the greatest revenue increase from a given increase in state economic activity?

A) General sales tax
B) Real property taxes
C) Motor fuel taxes
D) Personal income taxes

Question 8

Which of the following is not an example of a tax causing an economic dislocation?

A) A high income individual chooses to invest in tax free municipal bonds over corporate bonds which have a higher advertised rate.
B) A car dealership holds a gigantic sale to reduce its inventory before property taxes are assesseD)
C) High income individuals pay a greater amount of taxes than do low income people, but high income individuals are not guaranteed more public services.
D) None of the above-all are examples of dislocation.

Question 9

Real property taxes tend to have significantly lower compliance cost per dollar of revenue raised than do individual income taxes because:

A) local governments administer property taxes.
B) real property taxes are taxpayer passive while income taxes are taxpayer active.
C) individual income taxes yield vastly more revenue than do real property taxes.
D) the statement is inaccurate: real property compliance costs are actually higher.

Question 10

Why is it not appropriate to compare the cost of administering a local real property tax with the cost of administering the federal individual income tax?

A) Federal employees are better paid than are local employees.
B) Local employees are often supported by federal grant funds raised by the income tax.
C) Federal income tax revenue is larger than local real property tax revenue.
D) The costs of collecting the individual income tax must include compliance cost as well as administrative cost; there is no significant compliance cost for the typical real property tax.
Chapter Nine

Question 11

The marginal tax rate equals:

A) tax paid divided by the appropriate measure of affluence.
B) the tax liability resulting from true application of the tax statutes divided by the statutory base.
C) the tax rate required, at the margin, to balance the budget.
D) the amount by which a taxpayer's tax would increase from an additional dollar of the tax base.

Question 12

Which of the following taxes is not taxpayer active?

A) individual income tax
B) corporate income tax
C) retail sales tax
D) local property tax

Question 13

Which of these elements does not represent tax transparency?

A) amount of tax-visible burden of tax
B) administrative favoritism-no special treatment given
C) equity-tax is as equitable as possible
D) compliance requirements-calculations not mysterious

Question 14

The idea that individuals with the same economic capacity should pay the same tax represents:

A) tax fairness.
B) vertical equity.
C) horizontal equity.
D) common-sense tax system.

Question 15

A tax levied on a business will:

A) reduce the profits of owners.
B) reduce the wages of workers.
C) increase the prices paid by consumers.
D) result in any or all of the above actions depending upon the market conditions the firm faces.