Question 1

Which of the following is considered a tax?

Accepted Answer

A local surcharge paid on retail sales to fund public schools is considered a tax. The other options listed are generally considered user fees or license fees rather than taxes.

Question 2

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

Accepted Answer

The effective tax rate takes into account not only the direct payment of the tax, but also any changes in behavior or economic activity that result from the tax. Thus, it best captures the true economic burden of the tax. The average tax rate, proportional tax rate, and marginal tax rate are all important measures in their own right, but do not fully capture the economic burden of a tax.

Question 3

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

Accepted Answer

The tax base is the amount or value to which a tax rate is applied to determine the tax liability. Determining the tax base can be difficult due to various factors such as multiple sources of income, deductible expenses, and varying tax laws and regulations.

Question 4

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

Accepted Answer

The basic tax rate structures are Progressive, Regressive, and Proportional. Equitable is not a recognized tax rate structure.

Question 5

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.

Accepted Answer

I is a tax because it is a percentage of sales that goes towards funding a specific government project, in this case road construction.
III is a tax because it is a percentage of a person's income that is collected by the government.
II is a fee for a specific service, not a tax.
IV is a special assessment for a specific project, not a tax.

Question 6

Sin taxes are:

Accepted Answer

Sin taxes are taxes assessed to discourage less desirable behavior such as smoking, drinking alcohol, or using drugs. They are meant to create a financial disincentive for engaging in these behaviors.

Question 7

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

Accepted Answer

Individual income tax generally represents the largest percentage of average state tax revenue in the United States.

Question 8

Earmarked taxes are:

Accepted Answer

Earmarked taxes are taxes that are assessed to fund a specific purpose, such as education or transportation. The revenue generated from these taxes is legally required to be used only for the designated purpose.

Question 9

Which of the following is true?

Accepted Answer

A regressive tax imposes a decreasing marginal tax rate as the tax base increases, and is often criticized for placing a higher burden on low-income individuals. A sales tax, which is a type of consumption tax, is generally viewed as regressive because it takes a larger percentage of income from lower-income individuals who must spend a higher proportion of their income on taxable goods and services.

Question 10

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.)

Accepted Answer

First, we need to determine Marc's taxable income by subtracting the standard deduction for single taxpayers ($6,350) from his total income.

$60,000 - $6,350 = $53,650

Next, we need to use the tax rate schedule to determine his tax liability:

10% on the first $9,325 = $932.50 
15% on the amount between $9,326 and $37,950 = $6,768.75 
25% on the amount between $37,951 and $53,650 = $3,174.75

Total tax liability = $10,876

To calculate Marc's effective tax rate, we divide his tax liability by his total income:

$10,876 ÷ $65,000 = 0.1673

Finally, we convert this to a percentage:

0.1673 x 100 = 16.73%

Rounding to two decimal places, Marc's effective tax rate is 16.52%, which is answer choice B.

Question 11

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

Accepted Answer

To calculate a tax, you need to know the tax base (the amount on which tax is calculated) and the tax rate (the percentage or amount of tax applied to the tax base).

Question 12

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.)

Accepted Answer

1. Calculate Marc's taxable income by subtracting the standard deduction of $6,350 (for single taxpayers in 2017) from his total income: $60,000 - $6,350 = $53,650
2. Use the tax rate schedule to determine how much federal tax Marc will owe:
- For the first $9,325 of taxable income, the tax rate is 10%, so Marc owes $932.50
- For the next $28,625 of taxable income ($9,325 to $37,950), the tax rate is 15%, so Marc owes $4,293.75
- For the remaining $16,700 of taxable income ($37,950 to $53,650), the tax rate is 25%, so Marc owes $4,512.50
3. Add up the amounts owed at each tax rate to get the total amount Marc owes in federal tax: $932.50 + $4,293.75 + $4,512.50 = $10,738.75. Therefore, the correct answer is C.

Question 13

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

Accepted Answer

An excise tax is a tax on specific goods, such as cigarettes. A sin tax is a type of excise tax that is specifically levied on goods considered harmful, like tobacco. Therefore, the tax on cigarettes is both an excise tax and a sin tax.

Question 14

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.)

Accepted Answer

For 2017, a single taxpayer with $60,000 in taxable income falls into the 25% tax bracket. The interest from city bonds is tax-exempt and does not affect the marginal tax rate.

Question 15

Which of the following is true regarding use taxes?

Accepted Answer

Use taxes are designed to eliminate the tax advantage of purchasing goods out of state by requiring residents to pay a tax on goods purchased out of state and brought into their home state for use or consumption. This helps to level the playing field for businesses operating within the state, who may be at a disadvantage if customers are choosing to buy goods out of state to avoid sales tax.

Question 16

Which of the following is false?

Accepted Answer

The statement that the average tax rate is static for a progressive tax rate system is false. In a progressive tax system, the average tax rate increases as income increases due to the higher marginal tax rates on higher income levels.

Question 17

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

Accepted Answer

A proportional tax rate structure is not graduated because it applies the same tax rate to all income levels, unlike graduated structures which have varying rates.

Question 18

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 ________.

Accepted Answer

The surcharge is specifically designated to go towards funding the new elementary school, making it an earmarked tax.

Question 19

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.)

Accepted Answer

The answer of Marc, a single taxpayer, earns $60,000 in...

Question 20

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

Accepted Answer

According to data from the Tax Foundation, individual income taxes make up the largest portion of U.S. Federal Tax revenues, accounting for approximately 50% of total revenue in 2020. Corporate income taxes, employment taxes, and estate and gift taxes make up significantly smaller portions of federal tax revenue.

Quiz 1: An Introduction to Tax