Question 1

Suppose the government imposes a tax of 10 percent on the first $40,000 of income and 20 percent on all income above $40,000.What are the tax liability and the marginal tax rate for a person whose income is $30,000?

Accepted Answer

The answer of Suppose the government imposes a tax of...

Question 2

Sue earns income of $80,000 per year.Her average tax rate is 40 percent.Sue paid $4,500 in taxes on the first $30,000 she earned.What was the marginal tax rate on the rest of her income?

Accepted Answer

The answer of Sue earns income of $80,000 per year.Her...

Question 3

As tax laws become more complex,

Accepted Answer

As tax laws become more complex, individuals and businesses may struggle to understand and comply with them, resulting in a greater administrative burden for both taxpayers and tax authorities. This can lead to increased costs associated with complying with tax laws, as well as increased costs for the government to enforce them.

Question 4

If we want to gauge how much the income tax system distorts incentives,we should use the

Accepted Answer

The best choice to gauge how much the income tax system distorts incentives is the marginal tax rate. Marginal tax rates measure the additional tax paid on each additional dollar earned. This can help determine how much people's behavior may change based on changes in their income. If marginal tax rates are high, people may be less incentivized to work more or seek higher-paying jobs because they will be taxed more heavily on each additional dollar earned. Therefore, the marginal tax rate provides a better picture of the distortionary effect of the income tax system on incentives than the average tax rate or total tax revenue collected. The ability-to-pay principle is a principle for taxation fairness, rather than a measure of the behavioral effects of the tax system.

Question 5

James earns income of $90,000 per year.His average tax rate is 40%.James paid $5,500 in taxes on the first $40,000 he earned.What was the marginal tax rate on the rest of his income?

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The answer of James earns income of $90,000 per year.His...

Question 6

Sue earns income of $80,000 per year.Her average tax rate is 30 percent.Sue paid 20 percent in taxes on the first $30,000 she earned.What was the marginal tax rate on the rest of her income?

Accepted Answer

Sue paid 20% in taxes on her first $30,000 income. This means she paid $6,000 in taxes on that income. 
To find out how much she paid in taxes on the rest of her income, we need to subtract $30,000 from her total income: 
$80,000 - $30,000 = $50,000 
Sue's total tax paid is 30% of her income which is $80,000 x 0.30 = $24,000 
Subtracting the $6,000 she already paid on the first $30,000 leaves $18,000 in taxes to be paid on the remaining $50,000 of income. 
So, the marginal tax rate is: 
$18,000 / $50,000 x 100% = 36% 
Therefore, the best choice is D, 36 percent.

Question 7

Sue earns income of $80,000 per year.Her average tax rate is 50 percent.Sue paid $5,000 in taxes on the first $30,000 she earned.What was the marginal tax rate on the first $30,000 she earned,and what was the marginal tax rate on the remaining $50,000?

Accepted Answer

The marginal tax rate on the first $30,000 is calculated by dividing the taxes paid ($5,000) by the income earned ($30,000), which gives 16.67 percent. For the remaining $50,000, since the average tax rate is 50 percent and Sue earns $80,000, she pays a total of $40,000 in taxes. Subtracting the $5,000 paid on the first $30,000, she pays $35,000 on the remaining $50,000, resulting in a marginal tax rate of 70 percent for the remaining income.

Question 8

Nancy paid a tax of $0.50 on the last dollar she earned in 1999.Nancy's marginal tax rate in 1999 was

Accepted Answer

If Nancy paid a tax of $0.50 on the last dollar she earned, then her marginal tax rate is 50% since the tax is equal to half of the last dollar earned. The average tax rate would be lower than 50% since she would have paid a lower percentage on her earlier earnings. Therefore, option B is the correct answer.

Question 9

In the United States,the marginal tax rate on individual federal income tax

Accepted Answer

The marginal tax rate system in the United States is graduated, which means that individuals are taxed at different rates based on their level of income. As income increases, so does the tax rate. This means that individuals who earn more income will pay a higher percentage of their income in taxes than those who earn less. This system is designed to be progressive, with the idea that those who earn more can afford to pay a greater share of their income in taxes to support government programs and services.

Question 10

Because the marginal tax rate rises as income rises,

Accepted Answer

The marginal tax rate increases as income increases. This means that higher-income families will tend to pay a larger percentage of their income in taxes compared to lower-income families. This is due to the progressive nature of the tax system, where tax rates increase with income levels. Therefore, option A is the correct choice.

Question 11

Scenario 12-4.A taxpayer faces the following tax rates on her income:
 
-Refer to Scenario 12-4.The taxpayer faces

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The answer of Scenario 12-4.A taxpayer faces the following tax...

Question 12

Scenario 12-4.A taxpayer faces the following tax rates on her income:
 
-Refer to Scenario 12-4.At what level of income would the taxpayer's marginal tax rate be 30 percent and her average tax rate be 25 percent?

Accepted Answer

The answer of Scenario 12-4.A taxpayer faces the following tax...

Question 13

Suppose the government imposes a tax of 10 percent on the first $40,000 of income and 20 percent on all income above $40,000.What are the tax liability and the marginal tax rate for a person whose income is $50,000?

Accepted Answer

For income up to $40,000, the tax liability is 10% of income, so the tax on the first $40,000 is 0.10 x $40,000 = $4,000. For income above $40,000, the tax liability is 20% of income, so the tax on the remaining $10,000 is 0.20 x $10,000 = $2,000. Thus, the total tax liability is $4,000 + $2,000 = $6,000.

The marginal tax rate is the tax rate on the next dollar of income, so for someone earning $50,000, their marginal tax rate is 20%. Therefore, choice D is the correct answer.

Question 14

Tim earns income of $60,000 per year and pays $21,000 per year in taxes.Tim paid 20 percent in taxes on the first $30,000 he earned.What was the marginal tax rate on the second $30,000 he earned?

Accepted Answer

The answer of Tim earns income of $60,000 per year...

Question 15

A person's marginal tax rate equals

Accepted Answer

A person's marginal tax rate is the increase in taxes they would pay as a percentage of the rise in their income. It is the rate at which their tax liability would increase if they were to earn additional income.

Question 16

Which of the following is not an administrative burden of our tax system?

Accepted Answer

Paying the taxes owed is not an administrative burden of the tax system because it is the ultimate goal and purpose of the tax system. The other options involve time, effort, and resources spent on complying with tax laws and regulations.

Question 17

Scenario 12-4.A taxpayer faces the following tax rates on her income:
 
-Refer to Scenario 12-4.The taxpayer faces

Accepted Answer

The marginal tax rate is the rate at which the next dollar of income would be taxed. In this scenario, the taxpayer faces a marginal tax rate of 20 percent when her income rises from $30,000 to $30,001, because the tax rate changes from 10 percent to 20 percent at that income level.

Question 18

The deadweight loss of an income tax is determined by the

Accepted Answer

The deadweight loss of an income tax is determined by the marginal tax rate, which measures the change in tax paid for a change in income. Higher marginal tax rates create a larger deadweight loss because they discourage work and investment by reducing the after-tax return. Therefore, option B is correct, and the other options are not relevant to the calculation of deadweight loss.

Question 19

If your income is $40,000 and your income tax liability is $5,000,your marginal tax rate is

Accepted Answer

The marginal tax rate is the rate at which your last dollar of income is taxed, which cannot be determined solely from total income and total tax liability. Additional information about the tax brackets and how income is distributed across those brackets is needed.

Question 20

Tax systems that impose recordkeeping requirements on taxpayers are said to have

Accepted Answer

Tax systems that impose recordkeeping requirements on taxpayers have an administrative burden. This is because taxpayers have to maintain accurate records of their finances and transactions, which can be time-consuming and costly. The administrative burden can also increase if the taxpayer is subject to audits by the tax authorities, which require additional time and resources to comply with.

Quiz 12: The Design of the Tax System