Ad valorem taxation is assessed by charging a tax rate as a fraction of the market price of a good. It is commonly used to tax goods such as property, vehicles, and imports. It is not limited to only cigarettes and alcohol (answer D) and is not the same as personal income tax (answer A). It can also be applied to services (answer B is incorrect).

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Ad Valorem Taxation

Question 125

Multiple Choice

Ad valorem taxation

A) refers to the personal income tax.
B) is used to tax goods but not services.
C) is assessed by charging a tax rate as a fraction of the market price of a good.
D) is a tax that is applied only to cigarettes and alcohol.

Correct Answer: