Question 1

An excise tax is often used to try to influence behavior.

Accepted Answer

Excise taxes are often used to discourage or limit certain behaviors, such as smoking or drinking alcohol. By making these products more expensive through taxation, it is hoped that people will be less likely to engage in these activities.

Question 2

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 sales tax that would apply if the sale had been made in person.

Question 3

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 4

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

Accepted Answer

The answer of Like the Federal counterpart, the amount of...

Question 5

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 6

Currently, the Federal corporate income tax is less progressive than the individual income tax.

Accepted Answer

The Federal corporate income tax has a flat rate of 21%, regardless of the level of corporate income, while the individual income tax has progressive tax rates, with higher earners paying a higher percentage of their income in taxes.

Question 7

The ad valorem tax on personal use personalty is more often avoided by taxpayers than the ad valorem tax on business use personalty.

Accepted Answer

This is because the ad valorem tax on personal use personalty is often based on self-reporting and is more difficult to enforce and verify compared to the ad valorem tax on business use personalty, which is typically monitored and audited by government agencies. Additionally, businesses have a greater incentive to comply with tax regulations to avoid penalties and maintain their reputation.

Question 8

A fixture will be subject to the ad valorem tax on personalty rather than the ad valorem tax on realty.

Accepted Answer

A fixture, once attached to real property, is generally considered part of the real property and thus would be subject to the ad valorem tax on realty, not personalty.

Question 9

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 10

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

Accepted Answer

The Federal gas-guzzler tax applies to both domestic and imported automobiles in the United States that do not meet certain fuel economy standards.

Question 11

Before the Sixteenth Amendment to the Constitution was ratified, there was no valid Federal income tax on individuals.

Accepted Answer

Before the Sixteenth Amendment, the Federal government did levy income taxes, notably during the Civil War period. However, the legality of a permanent income tax was challenged and led to the Supreme Court ruling in Pollock v. Farmers' Loan & Trust Co. (1895) that such taxes were unconstitutional if not apportioned according to state populations. The Sixteenth Amendment, ratified in 1913, explicitly allowed the Federal government to levy an income tax without apportionment among the states.

Question 12

The pay-as-you-go feature of the Federal income tax on individuals conforms to Adam Smith's canon (principle) of certainty.

Accepted Answer

The pay-as-you-go feature of the Federal income tax on individuals does not conform to Adam Smith's canon (principle) of certainty as it requires individuals to estimate and prepay their taxes ahead of time, which can be uncertain and subject to change. Smith believed in a clear and certain tax system where individuals knew exactly what they owed and when they owed it.

Question 13

The ratification of the Sixteenth Amendment to the U.S.Constitution was necessary to validate the Federal income tax on corporations.

Accepted Answer

The ratification of the Sixteenth Amendment to the U.S. Constitution was necessary to validate the Federal income tax on individuals, not just corporations.

Question 14

There is a Federal excise tax on hotel occupancy.

Accepted Answer

The Federal government does not impose an excise tax on hotel occupancy; such taxes are typically levied at the state or local level.

Question 15

The Federal income tax on individuals generates more revenue than the Federal income tax on corporations.

Accepted Answer

According to the Tax Policy Center, in the fiscal year 2020, the individual income tax generated $1.6 trillion while the corporate income tax generated $230 billion. Therefore, the Federal income tax on individuals generates more revenue than the Federal income tax on corporations.

Question 16

Even if property tax rates are not changed, the amount of ad valorem taxes imposed on realty may not remain the same.

Accepted Answer

The amount of ad valorem taxes imposed on realty can be affected by changes in the property's assessed value or by changes in the tax rate for other types of taxes (such as school district taxes) that are included in the total ad valorem tax bill. Therefore, even if property tax rates remain the same, the amount of ad valorem taxes imposed on realty may not remain constant.

Question 17

The first income tax on individuals (after the ratification of the Sixteenth Amendment to the Constitution) levied tax rates from a low of 2% to a high of 6%.

Accepted Answer

This is true. The first income tax on individuals was introduced in 1913 with tax rates ranging from 2% to 6% based on income.

Question 18

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

Accepted Answer

Federal estate and gift taxes are progressive taxes because the tax rate increases as the value of the estate or gift increases.

Question 19

Mona inherits her mother's personal residence, which she converts to a furnished rental house.These changes should affect the amount of ad valorem property taxes levied on the properties.

Accepted Answer

Converting the personal residence to a furnished rental house may increase the assessed value of the property and therefore affect the amount of ad valorem property taxes levied on the property.

Question 20

Because the law is complicated, most individual taxpayers are not able to complete their Federal income tax returns without outside assistance.

Accepted Answer

The law surrounding Federal income tax returns is complex and difficult for most individuals to understand, which often requires them to seek outside assistance in completing their taxes.

Quiz 1: An Introduction to Taxation and Understanding the Federal Tax Law