Deck 1: An Introduction to Tax

Question 1

Taxes influence business decisions such as where a business should locate or how abusiness should be structured.

Answer 1

True

Question 2

Common examples of sin taxes include the taxes imposed on airline tickets and gasoline.

Answer 2

False

Question 3

The tax base for the federal income tax is taxable income.

Answer 3

True

Question 4

Tax policy rarely plays an important part in presidential campaigns.

Question 5

One benefit of a sin taxthe products being taxed.

Question 6

A taxpayer's average tax rate is the most appropriate tax rate to use in tax planning.

Question 7

One key characteristic of a tax is that it is a required payment to a governmental agency.

Question 8

The effective tax rate, in general, provides a better depiction of a taxpayer's tax burden than the average tax rate.

Question 9

The main difficulty in calculating an income tax is determining the correct amount of the tax base.

Question 10

A 1% charge imposed by a local government on football tickets sold is not considered atax if all proceeds are earmarked to fund local schools.

Question 11

A sales tax is a common example of a progressive tax rate structure.

Question 12

In a regressive tax rate system, the marginal tax rate will often be greater than the average tax rate.

Question 13

The two components of the tax calculation are the tax rate and the taxpayer's status.

Question 14

George recently paid $50 to renew his driver's license. The $50 payment is considered atax.

Question 15

A flat tax is an example of a graduated tax system.

Question 16

The effective tax rate expresses the taxpayer's total tax as a percentage of the taxpayer's taxable and nontaxable income.

Question 17

In a proportional (flat) tax rate system, the marginal tax rate will always equal the average tax rate.

Question 18

Taxes influence many types of business decisions but generally do not influence personaldecisions.

Question 19

In addition to raising revenues, specific U.S. taxes may have other objectives (e.g., economic or social objectives).

Question 20

Margaret recently received a parking ticket. This is a common example of a local tax.

Question 21

Horizontal equity is defined in terms of taxpayers in similar situations whereas vertical equity is defined in terms of taxpayers in different situations.

Question 22

Implicit taxes are indirect taxes on tax-favored assets.

Question 23

In considering the "economy" criterion in evaluating tax systems, one must consider this criterion from both the taxpayer and the government's perspective.

Question 24

A use tax is typically imposed by a state on goods purchased within the state.

Question 25

Property taxes may be imposed on both real and personal property.

Question 26

Margaret was issued a $150 speeding ticket. This is:

A) Not a tax because Margaret could have avoided payment if she did not speed.
B) Not a tax because it is considered a fine intended to punish illegal behavior.
C) A tax because payment is required by law.
D) A tax because it is imposed by a government agency.
E) A tax because the payment is not related to any specific benefit received from the government agency collecting the ticket.

Question 27

While sales taxes are quite common, currently the U.S. federal government does not impose a sales tax.

Question 28

Relative to explicit taxes, implicit taxes are much easier to estimate.

Question 29

Dynamic forecasting does not take into consideration taxpayers' responses to a tax change when estimating tax revenues.

Question 30

Self-employment taxes are charged on self-employment income in addition to any federal income tax.

Question 31

A common example of an employment related tax is the Medicare tax.

Question 32

Taxes influence which of the following decisions?

A) political decisions
B) personal decisions
C) investment decisions
D) business decisions
E) All of the choices are correct.

Question 33

Excise taxes are typically levied on the value of a good purchased.

Question 34

The income and substitution effects are two opposing effects that one could consider in static forecasting.

Question 35

Regressive tax rate structures are typically considered to be vertically equitable.

Question 36

The largest federal tax, in terms of revenue collected, is the social security tax.

Question 37

In terms of effective tax rates, the sales tax can be viewed as a regressive tax.

Question 38

The estate tax is assessed based on the fair market values of transfers made during a taxpayer's life.

Question 39

Estimated tax payments are one way the federal income tax system addresses the"certainty" criterion in evaluating tax systems.

Question 40

The 9th Amendment to the U.S. Constitution removed all doubt that a federal income tax was allowed under the U.S. Constitution.

Question 41

Which of the following is considered a tax?

A) Tolls
B) Entrance fees paid at national parks
C) Parking meter fees
D) Annual licensing fees
E) A local surcharge paid on retail sales to fund public schools

Question 42

The ultimate economic burden of a tax is best captured by:

A) The average tax rate.
B) The proportional tax rate.
C) The effective tax rate.
D) The marginal tax rate.
E) None of the choices are correct.

Question 43

The difficulty in calculating a tax is typically in the determination of:

A) The due date for the return.
B) The correct tax rate.
C) The tax base.
D) Where to file the tax return.
E) None of the choices are correct.

Question 44

Which of the following is not one of the basic tax rate structures?

A) Progressive
B) Regressive
C) Equitable
D) Proportional
E) All of these are different kinds of the basic tax rate structures

Question 45

Which of the following is a tax?I. A 1% special sales tax for funding local road construction.II. A fee paid to the state for a license to practice as an attorney.III. An income tax imposed by Philadelphia on persons working within the city limits. IV. A special property assessment for installing a new water system in the taxpayer's neighborhood.

A) Only I is correct.
B) I and III are correct.
C) Only III is correct.
D) III and IV are correct.
E) Only IV is correct.

Question 46

Sin taxes are:

A) Taxes assessed to fund a specific purpose.
B) Taxes assessed on certain illegal acts.
C) Taxes assessed by religious organizations.
D) Taxes assessed to discourage less desirable behavior.
E) None of the choices are correct.

Question 47

Which of the following represents the largest percentage of average state tax revenue?

A) Individual income tax
B) Sales tax
C) Other
D) Property tax
E) None of the choices are correct

Question 48

Earmarked taxes are:

A) Taxes assessed for only a specific time period.
B) Taxes assessed to discourage less desirable behavior.
C) Taxes assessed to fund a specific purpose.
D) Taxes assessed only on certain taxpayers.
E) None of the choices are correct.

Question 49

Which of the following is true?

A) A regressive tax rate structure imposes an increasing marginal tax rate as the tax base increases.
B) Regressive tax structures are the most common tax rate structure.
C) In terms of effective tax rates, a sales tax can be viewed as a regressive tax.
D) An example of a regressive tax is an excise tax.
E) None of the choices are correct.

Question 50

Marc, a single taxpayer, earns $60,000 in taxable income and $5,000 in interest from an investment in city of Birmingham Bonds. Using the U.S. tax rate schedule for year 2017, what is his effective tax rate? (Use tax rate schedule.)

A) 17.90%
B) 16.52%
C) 25.00%
D) 14.23%
E) None of the choices are correct

Question 51

To calculate a tax, you need to know:I. the tax baseII. the taxing agencyIII. the tax rateIV. the purpose of the tax

A) Only IV is correct.
B) Items I through IV are correct.
C) Only III is correct.
D) Only I is correct.
E) I and III are correct.

Question 52

Marc, a single taxpayer, earns $60,000 in taxable income and $5,000 in interest from an investment in city of Birmingham Bonds. Using the U.S. tax rate schedule for year 2017, how much federal tax will he owe? (Use tax rate schedule.)

A) $12,375.00
B) $9,252.50
C) $10,738.75
D) $15,000.00
E) None of the choices are correct

Question 53

The state of Georgia recently increased its tax on a carton of cigarettes by $2.00. What type of tax is this?

A) An excise tax
B) It is not a tax; it is a fine
C) A sin tax
D) A sin tax and An excise tax are correct
E) None of the choices are correct

Question 54

Marc, a single taxpayer, earns $60,000 in taxable income and $5,000 in interest from an investment in city of Birmingham Bonds. Using the U.S. tax rate schedule for year 2017, what is his current marginal tax rate? (Use tax rate schedule.)

A) 33.00%
B) 25.00%
C) 15.00%
D) 28.00%
E) None of the choices are correct

Question 55

Which of the following is true regarding use taxes?

A) Use taxes attempt to eliminate any tax advantage of purchasing goods out of state.
B) A use tax is relatively easy to enforce compared to a sales tax.
C) Use taxes encourage taxpayers to buy goods out of state to avoid paying sales tax in their home state.
D) A use tax is generally a progressive tax.
E) None of the choices are correct.

Question 56

Which of the following is false?

A) The average tax rate changes under a proportional tax rate structure, but it is static for a progressive tax rate system.
B) An example of a proportional tax is the tax on gasoline.
C) A proportional tax rate structure imposes a constant tax rate while a progressive tax rate structure imposes an increasing marginal rate related to the tax base.
D) An example of a progressive tax is the federal tax on gifts.
E) None of the choices are correct.

Question 57

Which of the following is not an example of a graduated tax rate structure?

A) U.S. Federal Income Tax
B) Regressive tax rate structure
C) Proportional tax rate structure
D) Progressive tax rate structure
E) None of the choices are correct

Question 58

The city of Granby, Colorado recently enacted a 1.5% surcharge on vacation cabin rentals that will help pay for the city's new elementary school. This surcharge is an example of ________.

A) A government fine
B) A sin tax to discourage undesirable behavior and An earmarked tax
C) An earmarked tax
D) A sin tax to discourage undesirable behavior
E) None of the choices are correct

Question 59

Marc, a single taxpayer, earns $60,000 in taxable income and $5,000 in interest from an investment in city of Birmingham Bonds. Using the U.S. tax rate schedule for year 2017, what is his average tax rate (rounded)? (Use tax rate schedule.)

A) 15.00%
B) 25.00%
C) 17.90%
D) 15.42%
E) None of the choices are correct

Question 60

Which of the following taxes represents the largest portion of U.S. Federal Tax revenues?

A) Corporate income taxes
B) Employment taxes
C) Individual income taxes
D) Estate and gift taxes
E) None of the choices are correct

Question 61

Al believes that SUVs have negative social and environmental effects because of their increased carbon monoxide emissions. He proposes eliminating sales taxes on smaller automobiles in favor of higher sales taxes levied on SUVs. Al performs somecalculations and comes to the conclusion that based on the current number of SUVs owned in the U.S. exactly the same amount of total sales tax will be collected under his reformed system. Which of the following concepts explains why Al's idea may not work?

A) The ability to pay principle.
B) Substitution effect.
C) Vertical equity.
D) Horizontal equity.
E) None of the choices are correct.

Question 62

If Susie earns $750,000 in taxable income, how much tax will she pay as a single taxpayer for year 2017? (Use tax rate schedule.)

A) $252,500.00
B) $242.230.80
C) $269,615.40
D) $252,818.85
E) None of the choices are correct.

Question 63

Which of the following is true regarding tax-advantaged assets?

A) They are typically subject to excise taxes to account for their low explicit taxes.
B) A corporate bond is typically considered a tax-advantaged asset and They are often subject to implicit taxes are correct but not They are typically subject to excise taxes to account for their low explicit taxes.
C) A corporate bond is typically considered a tax-advantaged asset.
D) They are often subject to implicit taxes.
E) None of the choices are correct.

Question 64

The concept of tax sufficiency:

A) Suggests that a government should consider the income and substitution effects when changing tax rates.
B) Suggests that a government should estimate how taxpayers will respond to changes in the current tax structure.
C) Suggests the need for tax forecasting.
D) All of the choices are correct.
E) None of the choices are correct.

Question 65

Manny, a single taxpayer, earns $65,000 per year in taxable income and an additional $12,00704)per year in city of Boston bonds.If Manny earns an additional $35,000 in taxable income in year 2017, what is his marginal tax rate on this income? (Use tax rate schedule.)

A) 25.69%
B) 25.00%
C) 21.89%
D) 28.00%
E) None of the choices are correct.

Question 66

Geronimo files his tax return as a head of household for year 2017. If his taxable income is $72,000, what is his average tax rate? (Use tax rate schedule.)

A) 18.24%
B) 19.08%
C) 25.00%
D) 17.02%
E) None of the choices are correct

Question 67

Which of the following is true regarding real property taxes and personal property taxes?

A) All U.S. states currently impose personal property taxes.
B) Personal property taxes are assessed on permanent structures and land.
C) Real property taxes are assessed on cars and boats.
D) Real property taxes are generally easier to administer than personal property taxes.
E) None of the choices are correct.

Question 68

Leonardo earns $80,000 of taxable income. He also has $15,000 in city of Tulsa bonds. His 7w8i)fe, Theresa, earns $50,000 of taxable income.What is Leonardo and Theresa's effective tax rate for year 2017? (Use tax rate schedule.)

A) 28.00%
B) 18.44%
C) 21.04%
D) 15.00%
E) None of the choices are correct.

Question 69

Which of the following federal government actions would make sense if a tax system fails to provide sufficient tax revenue?

A) Only increase federal spending.
B) Issue treasury bonds and cut funding to various federal projects but not increase federal spending.
C) Only cut funding to various federal projects.
D) Only issue treasury bonds.
E) None of the choices are correct.

Question 70

Leonardo earns $80,000 of taxable income. He also has $15,000 in city of Tulsa bonds. His 7w9i)fe, Theresa, earns $50,000 of taxable income.How much money would Leonardo and Theresa save if they file jointly instead of separately for year 2017? (Use tax rate schedule.)

A) $103.50
B) $5,932.50
C) $309.75
D) Nothing
E) None of the choices are correct.

Question 71

Manny, a single taxpayer, earns $65,000 per year in taxable income and an additional $12,00703)per year in city of Boston bonds.What is Manny's current marginal tax rate for year 2017? (Use tax rate schedule.)

A) 28.00%
B) 15.57%
C) 22.86%
D) 18.44%
E) None of the choices are correct.

Question 72

Leonardo earns $80,000 of taxable income. He also has $15,000 in city of Tulsa bonds. His 7w7i)fe, Theresa, earns $50,000 of taxable income.If Leonardo and his wife file married filing jointly in 2017, what would be their average tax rate? (Use tax rate schedule.)

A) 25.00%
B) 18.44%
C) 23.47%
D) 15.00%
E) None of the choices are correct.

Question 73

Employers often withhold federal income taxes directly from worker's paychecks. This is an example of which principle in practice?

A) Economy.
B) Certainty.
C) Equity.
D) Convenience.
E) None of the choices are correct.

Question 74

Leonardo, who is married but files separately, earns $80,000 of taxable income. He also has75)$15,000 in city of Tulsa bonds. His wife, Theresa, earns $50,000 of taxable income.If Leonardo earned an additional $30,000 of taxable income this year, what would be the marginal tax rate on the extra income for year 2017? (Use tax rate schedule.)

A) 25.00%
B) 17.50%
C) 28.00%
D) 27.75%
E) None of the choices are correct.

Question 75

The substitution effect:

A) Is typically more descriptive for taxpayers with lower disposable income.
B) Predicts that taxpayers will work harder to pay for consumer products when tax rates increase.
C) Results in the government collecting more aggregate tax revenue than under the income effect.
D) Is one of the effects considered in static forecasting.
E) None of the choices are correct.

Question 76

Which of the following would not be a failure of the horizontal equity concept?

A) Two taxpayers pay different amounts of estate tax because one taxpayer's estate is worth significantly more.
B) Two taxpayers pay different amounts of property tax amounts on similar plots of land (i.e., same value) because one plot of land is used to raise crops.
C) Two taxpayers with identical income pay different amounts of tax because one taxpayer's income includes tax exempt interest.
D) All of the choices are correct.
E) None of the choices are correct.

Question 77

Leonardo, who is married but files separately, earns $80,000 of taxable income. He also has76)$15,000 in city of Tulsa bonds. His wife, Theresa, earns $50,000 of taxable income.If Leonardo instead had $30,000 of additional tax deductions for year 2017, his marginal tax rate on the deductions would be: (Use tax rate schedule.)

A) 28.00%
B) 25.35%
C) 16.37%
D) 25.00%
E) None of the choices are correct.

Question 78

Which of the following statements is true?

A) Municipal bond interest is subject to implicit tax.
B) Municipal bonds typically pay a higher interest rate than corporate bonds with similar risk.
C) Municipal bond interest is subject to explicit federal tax.
D) All of the choices are correct.
E) None of the choices are correct.

Question 79

Congress recently approved a new, smaller budget for the IRS. What taxation concept evaluates the cost of administering our tax law?

A) Equity.
B) Certainty.
C) Economy.
D) Convenience.
E) None of the choices are correct.

Question 80

Which of the following principles encourages a vertically equitable tax system?

A) None of the choices are correct.
B) Economy.
C) Ability to pay principle.
D) Pay as you go.
E) Income effects.