Question 1

The Federal estate and gift taxes are examples of progressive taxes.

Accepted Answer

Federal estate and gift taxes are based on the value of the estate or gift, so the tax rate increases as the value of the estate or gift increases, making them examples of progressive taxes.

Question 2

Like the Federal counterpart, the amount of the state excise taxes on gasoline varies from state to state.

Accepted Answer

False

Question 3

The Federal excise tax on cigarettes is an example of a proportional tax.

Accepted Answer

A proportional tax is one in which the tax rate remains the same regardless of the taxpayer's income or ability to pay. The Federal excise tax on cigarettes is a specific amount per cigarette sold, making it a proportional tax.

Question 4

Currently, the Federal income tax is less progressive than it ever has been in the past.

Accepted Answer

The progressivity of the Federal income tax has varied over time with changes in tax laws, rates, and structures. While there have been periods with higher top marginal tax rates, suggesting greater progressivity, the current tax system includes a variety of deductions, credits, and progressive rate structures designed to maintain its progressive nature. Additionally, historical comparisons without considering the full context of tax laws and economic conditions can be misleading.

Question 5

Unlike FICA, FUTA requires that employers comply with state as well as Federal rules.

Accepted Answer

FUTA (Federal Unemployment Tax Act) applies to all employers, but the requirements for compliance may vary from state to state. The state rules must be followed in addition to the federal rules.

Question 6

A Federal excise tax is no longer imposed on admission to theaters.

Accepted Answer

This is true. The Federal excise tax on admission to theaters was repealed in 1969.

Question 7

States impose either a state income tax or a general sales tax, but not both types of taxes.

Accepted Answer

Some states impose both a state income tax and a general sales tax, such as California, Minnesota, and New York.

Question 8

A parent employs his twin daughters, age 17, in his sole proprietorship.The daughters are not subject to FICA coverage.

Accepted Answer

According to the IRS, children under the age of 18 who work for their parent's sole proprietorship are not subject to FICA (Social Security and Medicare) taxes. Since the twin daughters are 17, they would fit this criteria.

Question 9

The principal objective of the FUTA tax is to provide some measure of retirement security.

Accepted Answer

The principal objective of the FUTA tax is to fund the federal unemployment insurance program for workers who lose their jobs due to no fault of their own, not to provide retirement security.

Question 10

There is a Federal excise tax on hotel occupancy.

Accepted Answer

The United States does not have a Federal excise tax specifically on hotel occupancy; such taxes are typically imposed at the state or local level.

Question 11

An inheritance tax is a tax on a decedent's right to pass property at death.

Accepted Answer

An inheritance tax is a tax on the beneficiaries' right to receive property from a decedent, not on the decedent's right to pass property at death.

Question 12

Sales made by mail order are not exempt from the application of a general sales (or use) tax.

Accepted Answer

Sales made by mail order are subject to the same tax laws as sales made in physical stores, and are not exempt from general sales or use taxes.

Question 13

Currently, the tax base for the Social Security component of the FICA is not limited to a dollar amount.

Accepted Answer

The tax base for the Social Security component of the FICA is limited to a dollar amount. For 2021, the tax is imposed on wages up to $142,800.

Question 14

On transfers by death, the Federal government relies on an estate tax, while states impose an estate tax, an inheritance tax, both taxes, or neither tax.

Accepted Answer

This statement is true. The Federal government imposes an estate tax on transfers by death, while some states impose an estate tax, inheritance tax, or both. Some states do not have either tax.

Question 15

Two persons who live in the same state but in different counties may not be subject to the same general sales tax rate.

Accepted Answer

Each county in a state may have its own sales tax rate, so two persons in different counties may be subject to different sales tax rates.

Question 16

The FICA tax (Medicare component) on wages is progressive since the tax due increases as wages increase.

Accepted Answer

The Medicare component of the FICA tax is a flat rate tax, not progressive; it applies the same percentage rate to wages regardless of income level.

Question 17

The Federal gas-guzzler tax applies only to automobiles manufactured overseas and imported into the U.S.

Accepted Answer

The Federal gas-guzzler tax applies to all cars sold in the United States, regardless of whether they are manufactured domestically or overseas.

Question 18

A safe and easy way for a taxpayer to avoid local and state sales taxes is to make the purchase in a state that levies no such taxes.

Accepted Answer

The answer of A safe and easy way for a...

Question 19

Not all of the states that impose a general sales tax also have a use tax.

Accepted Answer

All states that have a general sales tax also impose a use tax to ensure that purchases made out of state for use within the state are taxed equivalently to in-state purchases.

Question 20

One of the major reasons for the enactment of the Federal estate tax was to prevent large amounts of wealth from being accumulated within the family unit.

Accepted Answer

The Federal estate tax was designed to prevent large amounts of wealth from being accumulated within the family unit and to generate revenue for the government.

Quiz 1: Introduction to Taxation