Match each term with the correct statement below.
-Tax planning using legal methods to minimize the tax liability.

Question

Quizplus · Accepted Answer

Tax avoidance refers to the legal use of various methods to minimize tax liability.

Answer: I
 Tax evasion refers to the illegal and intentional non-payment or underpayment of taxes.

Answer: D
 Marginal tax rate refers to the tax rate applied to the next dollar of taxable income earned.

Answer: B
 Effective tax rate is the average rate of tax that a taxpayer pays on their total income.

Answer: E
 A progressive rate structure means that the tax rate increases as the taxable income increases.

Answer: F
 A proportional rate structure means that the tax rate remains the same regardless of the level of taxable income.

Answer: G
 A regressive rate structure means that the tax rate decreases as the taxable income increases.

Answer: A
 Average tax rate refers to the total amount of tax paid divided by the taxable income.

Answer: J
 Vertical equity refers to the idea that taxpayers with higher levels of income should pay a higher rate of tax, while taxpayers with lower levels of income should pay a lower rate of tax.

Answer: C
 Horizontal equity refers to the idea that taxpayers with similar financial situations should pay similar levels of tax.

Match Each Term with the Correct Statement Below