Question 1

The FICA tax (Medicare component) on wages is progressive since the tax due increases as wages increase.

Accepted Answer

The Medicare component of the FICA tax is a flat rate tax, not progressive; it applies the same percentage rate to wages regardless of income level.

Question 2

One of the major reasons for the enactment of the Federal estate tax was to prevent large amounts of wealth from being accumulated within a family unit.

Accepted Answer

The Federal estate tax was enacted to prevent the concentration of wealth within a family and to promote a more equitable distribution of wealth. It aims to tax the transfer of large estates to heirs and is designed to reduce the concentration of wealth in the hands of few individuals or families.

Question 3

Currently, the Federal corporate income tax is less progressive than the individual income tax.

Accepted Answer

The Federal corporate income tax is a flat rate of 21% regardless of a company's taxable income, whereas the individual income tax has a progressive tax rate structure with rates ranging from 10% to 37% based on the taxpayer's income level. Therefore, the individual income tax is more progressive.

Question 4

States impose either a state income tax or a general sales tax, but not both types of taxes.

Accepted Answer

There are some states in the US that impose both a state income tax and a general sales tax. These states include California, Minnesota, and New Jersey, among others.

Question 5

An inheritance tax is a tax on a decedent's right to pass property at death.

Accepted Answer

An inheritance tax is a tax on the beneficiaries' right to receive property from a decedent, not on the decedent's right to pass property at death.

Question 6

An excise tax is often used to try to influence behavior.

Accepted Answer

An excise tax is a tax on specific goods or services, and they are often used to influence behavior. For example, a tax on cigarettes is intended to discourage people from smoking, and a tax on sugary drinks is intended to discourage people from consuming too much sugar.

Question 7

The ad valorem tax on personal use personalty is more often avoided by taxpayers than the ad valorem tax on business use personalty.

Accepted Answer

Personal use personalty (such as household goods and personal vehicles) is often difficult to track and value, which makes it easier for taxpayers to underreport and avoid paying the ad valorem tax. On the other hand, business use personalty (such as office equipment and commercial vehicles) is typically well documented and easier for tax authorities to track and value, making it more difficult to avoid paying the ad valorem tax.

Question 8

Even if property tax rates are not changed, the amount of ad valorem taxes imposed on realty may not remain the same.

Accepted Answer

The amount of ad valorem taxes imposed on realty can change due to changes in the property's assessed value, which can be affected by factors such as market conditions, improvements to the property, and reassessments by the taxing authority.

Question 9

Like the Federal counterpart, the amount of the state excise taxes on gasoline varies from state to state.

Accepted Answer

The answer of Like the Federal counterpart, the amount of...

Question 10

There is a Federal excise tax on hotel occupancy.

Accepted Answer

The Federal government does not impose an excise tax on hotel occupancy; such taxes are typically levied at the state or local level.

Question 11

Two persons who live in the same state but in different counties may not be subject to the same general sales tax rate.

Accepted Answer

The general sales tax rate can vary by county or city within a state, so two persons living in different counties may be subject to different sales tax rates.

Question 12

A safe and easy way for a taxpayer to avoid local and state sales taxes is to make the purchase in a state that levies no such taxes.

Accepted Answer

The answer of A safe and easy way for a...

Question 13

Sales made by mail order are not exempt from the application of a general sales (or use) tax.

Accepted Answer

Sales made by mail order are subject to the same sales (or use) tax as any other purchase made in-state. The tax is based on the location of the buyer, not the seller.

Question 14

Mona inherits her mother's personal residence, which she converts to a furnished rental house.These changes should affect the amount of ad valorem property taxes levied on the properties.

Accepted Answer

Converting the personal residence to a furnished rental house will change the property's classification and may result in a different assessment of its value, therefore affecting the amount of ad valorem property taxes levied on the property.

Question 15

The Federal excise tax on cigarettes is an example of a proportional tax.

Accepted Answer

A proportional tax is one in which the tax rate remains the same regardless of the taxpayer's income or ability to pay. The Federal excise tax on cigarettes is a specific amount per cigarette sold, making it a proportional tax.

Question 16

A fixture will be subject to the ad valorem tax on personalty rather than the ad valorem tax on realty.

Accepted Answer

A fixture, once permanently attached to real property, is generally considered part of the real property and thus would be subject to the ad valorem tax on realty, not personalty.

Question 17

Not all of the states that impose a general sales tax also have a use tax.

Accepted Answer

All states that have a general sales tax also impose a use tax to ensure that purchases made out of state for use within the state are taxed equivalently to in-state purchases.

Question 18

The Federal gas-guzzler tax applies only to automobiles manufactured overseas and imported into the United States.

Accepted Answer

The Federal gas-guzzler tax applies to both domestically manufactured and imported automobiles in the United States.

Question 19

On transfers by death, the Federal government relies on an estate tax, while states impose an estate tax, an inheritance tax, both taxes, or neither tax.

Accepted Answer

This statement is true. The Federal government imposes an estate tax on transfers by death, while states have the option to impose an estate tax, an inheritance tax, both taxes, or neither tax.

Question 20

The Federal estate and gift taxes are examples of progressive taxes.

Accepted Answer

Federal estate and gift taxes are based on the value of the estate or gift, making them a progressive tax.

Quiz 1: Introduction to Taxation