Question 1

Jurisdiction M imposes an individual income tax based on the following schedule. $\begin{array}{rr}\text { Rate }&\text { Income bracket }\
58 & \$-0-\text { to } \$ 50,000 \
+88 & \$ 50,001 \text { to } \$ 200,000 \
+128 & \$ 200,001 \text { and above }
\end{array}$ Which of the following statements is false?

Accepted Answer

The tax rates provided are flat rates for each bracket, not percentages. Therefore, the statements about average and marginal tax rates being specific percentages are incorrect.

Question 2

Which of the following statements concerning the standard of fairness is false?

Accepted Answer

The statement that the public perception that the federal income tax is unfair has decreased in recent decades is false. According to a Gallup poll conducted in April 2021, 55% of Americans think that the income tax they have to pay is fair, while 44% think it is not. This indicates that the public perception of fairness concerning federal income tax has remained relatively stable in recent years.

Question 3

Which of the following statements concerning a regressive tax rate structure is true?

Accepted Answer

A regressive tax rate structure is characterized by a decrease in the tax rate as the base (such as income or consumption) increases, which contradicts the principles of distributive justice and the theory of declining marginal utility of income. Additionally, in a regressive system, the average tax rate typically decreases as income increases, not specifically comparing it to the marginal tax rate in the manner described.

Question 4

Jurisdiction M imposes an individual income tax based on the following schedule. $\begin{array}{rr}\text { Rate }&\text { Income bracket }\
58 & \$-0-\text { to } \$ 50,000 \
+88 & \$ 50,001 \text { to } \$ 200,000 \
+128 & \$ 200,001 \text { and above }
\end{array}$ Ms. Owen has $314,000 taxable income. Compute the tax on this income.

Accepted Answer

The answer of Jurisdiction M imposes an individual income tax...

Question 5

Jurisdiction M imposes an individual income tax based on the following schedule. $\begin{array}{rr}\text { Rate }&\text { Income bracket }\
58 & \$-0-\text { to } \$ 50,000 \
+88 & \$ 50,001 \text { to } \$ 200,000 \
+128 & \$ 200,001 \text { and above }
\end{array}$ Mr. Coen has $78,000 taxable income. Compute the tax on this income.

Accepted Answer

The tax on the first $50,000 is $50,000 x 0.058 = $2,900. The tax on the next $150,000 is $150,000 x 0.088 = $13,200. The total tax is $2,900 + $13,200 = $16,100.

Question 6

Vervet County levies a real property tax based on the following schedule. $\begin{array}{rr}\text { Rate }&\text { Assessed value }\
38 & \$-0-\text { to } \$ 250,000 \
+18 & \$ 250,001 \text { and above }
\end{array}$ Which of the following statements is false?

Accepted Answer

The given tax rates are in mills (per thousand), not percentages. Thus, without calculating the exact tax burdens and average rates, the statements about percentages cannot be directly compared to the mill rates provided. However, the statement about the marginal tax rate (C) is clearly aligned with the tax schedule, indicating a higher rate for values above $250,000, making none of the choices inherently false without further calculation.

Question 7

Jurisdiction M imposes an individual income tax based on the following schedule. $\begin{array}{rr}\text { Rate }&\text { Income bracket }\
58 & \$-0-\text { to } \$ 50,000 \
+88 & \$ 50,001 \text { to } \$ 200,000 \
+128 & \$ 200,001 \text { and above }
\end{array}$ Which type of rate structure does this tax use?

Accepted Answer

The tax rate increases as income increases, which is characteristic of a progressive tax structure.

Question 8

Which of the following statements about a progressive tax rate structure is false?

Accepted Answer

The answer of Which of the following statements about a...

Question 9

The City of Willford levies a flat 7% tax on individual income in excess of $55,000. Individuals who earn $55,000 or less pay no income tax.Ms. Vello earned $127,200 income this year. Compute her city income tax and determine her average tax rate.Mr. Sui earned $68,900 income this year. Compute his city income tax and determine his average tax rate.Does Willford have a proportionate, progressive, or regressive tax rate structure?

Accepted Answer

The answer of The City of Willford levies a flat...

Question 10

Which of the following statements about a proportionate income tax rate structure is false?

Accepted Answer

A proportionate income tax rate structure does not necessarily have a theoretic justification for its potential for wealth redistribution. In fact, a progressive rate structure is typically seen as more effective for wealth redistribution as it taxes higher income individuals at a higher rate.

Question 11

Congress recently amended the tax law to make it easier for individuals to file their income tax returns electronically (online). Which of the following statements is true?

Accepted Answer

The amendment is intended to improve the convenience of the tax by making it easier for individuals to file their returns electronically.

Question 12

Which of the following statements concerning income tax rate structures is false?

Accepted Answer

Under a progressive rate structure, the marginal tax rate (the rate on the next dollar of income earned) increases as income increases, which means it is not equal to the average tax rate (total taxes paid divided by total income) for a taxpayer. The average tax rate is typically lower than the marginal rate for any given level of income in a progressive system.

Question 13

Jurisdiction M imposes an individual income tax based on the following schedule. $\begin{array}{rr}\text { Rate }&\text { Income bracket }\
58 & \$-0-\text { to } \$ 50,000 \
+88 & \$ 50,001 \text { to } \$ 200,000 \
+128 & \$ 200,001 \text { and above }
\end{array}$ Which of the following statements is true?

Accepted Answer

Ms. Kaye's taxable income is in the $50,001 to $200,000 bracket, so her marginal tax rate is 8%.

Question 14

Congress originally enacted the federal estate and gift taxes to improve:

Accepted Answer

The federal estate and gift taxes were enacted to improve distributional justice by ensuring that the wealthy pay a fair share of taxes upon their passing and gift-giving. This is evidenced by the fact that the estate and gift taxes are only applicable to high net worth individuals and estates, reflecting a desire to redistribute wealth and promote a more equal distribution of resources.

Question 15

Mr. Ohno owns and operates a part-time service business that generates $80,000 annual taxable income. Assume that his federal tax rate on this income is 17%. Because of recent legislation, this rate will increase to 25% next year.
Based on a static forecast, how much additional revenue will the federal government collect from Mr. Ohno next year?How much additional revenue will the federal government collect if Mr. Ohno decides to work fewer hours and consequently earns only $50,000 next year?

Accepted Answer

The answer of Mr. Ohno owns and operates a part-time...

Question 16

Assume that Congress plans to amend the federal income tax to provide a deduction for the first $2,400 of residential rent paid by families with incomes below the federal poverty level. Which of the following statements is true?

Accepted Answer

The amendment is intended to improve the equity of the tax by providing a deduction for families with low incomes to decrease their tax burden and provide some relief. This helps to ensure a fairer distribution of tax burden across different income groups.

Question 17

Which of the following tax policies would increase the redistribution of wealth across society?

Accepted Answer

Increasing the highest marginal income tax rate would result in a larger portion of income being taken from individuals in higher income brackets, which would increase the redistribution of wealth across society. Repealing the federal estate and gift taxes, replacing the progressive income tax rate structure with a flat rate, and replacing the income tax with a national sales tax would all likely result in less redistribution of wealth.

Question 18

Which of the following statements about tax rate structures is true?

Accepted Answer

The answer of Which of the following statements about tax...

Question 19

Assume that Congress plans to amend the federal individual income tax to eliminate the deductions for medical care, charitable contributions, and home mortgage interest. Which of the following statements is true?

Accepted Answer

Eliminating deductions simplifies the tax code, reducing complexity, and increases neutrality by treating all forms of personal spending more equally, without favoring certain types of expenditures like medical care, charitable contributions, or home mortgage interest.

Question 20

Assume that Congress plans to amend the federal income tax to provide a deduction for the cost of energy-efficient fluorescent light bulbs. Which of the following statements is true?

Accepted Answer

The amendment is intended to improve the efficiency of the tax by incentivizing taxpayers to use energy-efficient fluorescent light bulbs, which reduces energy usage and helps the environment. This aligns with the principle of using the tax system to encourage desirable behavior, known as "tax expenditures."

Quiz 2: Policy Standards for a Good Tax