Question 1

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

Accepted Answer

The tax base refers to the amount or value that is subject to taxation. Determining the correct tax base can be complex and involve various factors, such as deductions and exemptions, which can vary depending on the jurisdiction and the type of tax. Once the tax base is determined, the tax rate and due date can be more easily calculated.

Question 2

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

Accepted Answer

Individual income tax tends to be the largest percentage of average state tax revenue. While sales tax and property tax are also significant sources of revenue, individual income tax typically generates more revenue than either of those two sources. "Other" is too vague to be a meaningful answer.

Question 3

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

Accepted Answer

Equitable is not one of the basic tax rate structures. The basic tax rate structures are Proportional, Regressive, and Progressive.

Question 4

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 2018, what is his current marginal tax rate? (Use tax rate schedule)

Accepted Answer

See 2018 IRS rate schedule for single taxpayers.

Question 5

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 2018, what is his average tax rate (rounded)? (Use tax rate schedule)

Accepted Answer

15.23% = $9,139.50/60,000

Question 6

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

Accepted Answer

According to the Congressional Budget Office, individual income taxes represent the largest portion of U.S. Federal Tax revenues, accounting for approximately 50% of total tax revenue.

Question 7

Which of the following is considered a tax?

Accepted Answer

The local surcharge paid on retail sales to fund public schools is considered a tax as it is a compulsory payment to the government intended for public use.

Other options in the list such as tolls, parking meter fees, annual licensing fees, and entrance fees at national parks are not considered taxes as they are fees for specific services or amenities provided by the government.

Question 8

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 2018, what is his effective tax rate (rounded)? (Use tax rate schedule)

Accepted Answer

14.06% = $9,139.50/(60,000 + 5,000)

Question 9

Which of the following is True?

Accepted Answer

A sales tax can be viewed as a regressive tax because it imposes a higher burden on low-income households, as they spend a larger percentage of their income on taxable goods compared to high-income households. Option A is false because a regressive tax structure imposes a decreasing marginal tax rate as the tax base increases. Option B is false because progressive tax structures are the most common tax rate structure. Option C is true, as an excise tax is typically levied on goods that are consumed more heavily by low-income households, such as cigarettes and alcohol, making it regressive.

Question 10

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

Accepted Answer

A sin tax is a tax on goods considered harmful, like cigarettes, and an excise tax is a tax on specific goods, such as tobacco products. The $2.00 increase fits both definitions.

Question 11

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

Accepted Answer

The effective tax rate captures the actual amount of taxes paid as a percentage of income earned, taking into account any deductions or credits. It reflects the true burden of the tax on the taxpayer. The marginal tax rate only applies to the last dollar earned and does not capture the overall burden of the tax. The average tax rate and proportional tax rate do not consider any variations in income levels or deductions.

Question 12

Which of the following is False?

Accepted Answer

Under a progressive tax rate system, the average tax rate also increases as the tax base increases. Therefore, statement B is false.

Question 13

To calculate a tax, you need to know:
I. the tax base
II. the taxing agency
III. the tax rate
IV. the purpose of the tax

Accepted Answer

To calculate a tax, you need to know the tax base (I) which is the value on which the tax is calculated, and the tax rate (III) which is the percentage of the tax base that you have to pay to the taxing agency (II). The purpose of the tax (IV) is not necessary to know for the calculation, but it is important to understand the reason for the tax being levied. Therefore, option (E) is the best choice as it includes the correct answers, i.e., I and III.

Question 14

Sin taxes are:

Accepted Answer

Surcharges on alcohol and tobacco products are examples of "sin taxes".

Question 15

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

Accepted Answer

A proportional tax rate structure, also known as a flat tax, imposes a constant tax rate throughout the tax base.

Question 16

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 2018, how much federal tax will he owe? (Use tax rate schedule)

Accepted Answer

$9,139.50 = 4,453.50 + 0.25(60,000 − 38,700)

Question 17

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

An earmarked tax is a tax that is specifically designated for a particular purpose, in this case, to fund the construction of a new elementary school in Granby. This surcharge is not a sin tax, as it is not designed to discourage any undesirable behavior. It is also not a government fine, as it is not a punishment for any violation of the law.

Question 18

Earmarked taxes are:

Accepted Answer

Earmarked taxes are taxes that are assessed to fund a specific purpose. The revenue generated from these taxes is designated for a particular program or project, rather than being added to a general fund. This provides greater accountability and transparency in government spending, as taxpayers can see exactly where their money is going.

Question 19

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

A tax is a payment required by a government that is unrelated to any specific benefit or service received from the government.

Question 20

Which of the following is True regarding use taxes?

Accepted Answer

Use taxes attempt to eliminate any tax advantage of purchasing goods out of state. Use taxes are taxes imposed on goods purchased out of state and brought into the taxing state for use or consumption, and they ensure that taxpayers who purchase goods out of state pay the same amount of tax as those who purchase similar goods in-state.

Quiz 1: An Introduction to Tax