Question 1

A taxpayer's average tax rate is the most appropriate tax rate to use in tax planning.The marginal tax rate is particularly useful in tax planning because it represents the rate of taxation or savings that would apply to additional taxable income or additional tax deductions.

Accepted Answer

The marginal tax rate is more appropriate for tax planning as it applies to additional income or deductions, affecting future financial decisions.

Question 2

The main difficulty in calculating an income tax is determining the correct amount of the tax base.

Accepted Answer

Calculating income tax requires accurate identification and calculation of the tax base, which includes sources of income and deductions, allowances, and other factors that affect the final tax amount.

Question 3

Tax policy rarely plays an important part in presidential campaigns.

Accepted Answer

Tax policy is often a key issue in presidential campaigns, as it affects the economy, government revenues, and the financial well-being of individuals and businesses. Candidates frequently propose different tax plans and use them to differentiate themselves from their opponents.

Question 4

The effective tax rate expresses the taxpayer's total tax as a percentage of the taxpayer's taxable and nontaxable income.

Accepted Answer

The effective tax rate takes into account all taxes paid, including federal, state, and local income tax, as well as payroll taxes and other taxes. It is calculated by dividing the total tax paid by the taxpayer's taxable and nontaxable income.

Question 5

A 1% charge imposed by a local government on football tickets sold is not considered a tax if all proceeds are earmarked to fund local schools.

Accepted Answer

The answer of A 1% charge imposed by a local...

Question 6

A sales tax is a common example of a progressive tax rate structure.

Accepted Answer

A sales tax is an example of a regressive tax rate structure as it places a higher burden on low-income earners compared to high-income earners as they spend a higher proportion of their income on taxable goods and services. A progressive tax rate structure would have higher tax rates for higher income earners.

Question 7

In addition to raising revenues,specific U.S.taxes may have other objectives (e.g. ,economic or social objectives) .

Accepted Answer

Many U.S. taxes are designed with objectives beyond just raising revenue, such as promoting economic growth, incentivizing behavior (e.g. tax credits for buying electric cars), or addressing social issues (e.g. sin taxes on alcohol and tobacco).

Question 8

One benefit of a sin tax (e.g. ,a tax on cigarettes) is that it should increase the demand for the products being taxed.

Accepted Answer

The purpose of a sin tax is not to increase demand, but to discourage the consumption of products that are deemed harmful or socially undesirable. The tax increases the price of the product, making it less attractive to consumers and potentially reducing demand.

Question 9

Taxes influence many types of business decisions but generally do not influence personal decisions.

Accepted Answer

Taxes can influence personal decisions such as where to live, whether to get married, how many children to have, and how to invest money.

Question 10

A flat tax is an example of a graduated tax system.

Accepted Answer

A flat tax is a tax system where everyone pays the same tax rate regardless of their income, while a graduated tax system (also known as a progressive tax system) is one where the tax rate increases as the taxpayer's income increases.

Question 11

Taxes influence business decisions such as where a business should locate or how a business should be structured.

Accepted Answer

Taxes can impact the cost of doing business, so businesses may consider factors such as state tax rates or tax incentives when deciding where to locate or how to structure their business.

Question 12

George recently paid $50 to renew his driver's license.The $50 payment is considered a tax.

Accepted Answer

The $50 payment for a driver's license renewal is considered a fee, not a tax. Taxes are payments made to the government that are not directly tied to a specific service or benefit received. Fees, on the other hand, are payments made for a specific service or benefit received.

Question 13

The effective tax rate,in general,provides a better depiction of a taxpayer's tax burden than the average tax rate.

Accepted Answer

The effective tax rate takes into account all taxes paid by a taxpayer, including income tax, payroll tax, and any other taxes. The average tax rate only considers income tax as a percentage of income. Therefore, the effective tax rate provides a more accurate picture of a taxpayer's overall tax burden.

Question 14

Common examples of sin taxes include the taxes imposed on airline tickets and gasoline.

Accepted Answer

Sin taxes are generally taxes on goods and services deemed harmful to society, such as alcohol, tobacco, and sugary drinks. While taxes on airline tickets and gasoline may be used to fund transportation infrastructure, they are not typically considered sin taxes.

Question 15

In a proportional (flat) tax rate system,the marginal tax rate will always equal the average tax rate.

Accepted Answer

In a proportional tax rate system, everyone pays the same percentage of their income as taxes. Therefore, the marginal tax rate (the tax rate on the next dollar earned) will always be the same as the average tax rate (total taxes paid divided by total income).

Question 16

One key characteristic of a tax is that it is a required payment to a governmental agency.

Accepted Answer

A tax is a mandatory payment to a government agency imposed by law, and failure to pay it can result in legal consequences such as fines or imprisonment.

Question 17

The two components of the tax calculation are the tax rate and the taxpayer.Tax equals the tax base multiplied by the tax rate.

Accepted Answer

The two components of tax calculation are the tax base and the tax rate, not the taxpayer. Tax equals the tax base multiplied by the tax rate.

Question 18

In a regressive tax rate system,the marginal tax rate will often be greater than the average tax rate.

Accepted Answer

In a regressive tax rate system, the marginal tax rate decreases as income increases. Therefore, the marginal tax rate will generally be lower than the average tax rate in a regressive tax system.

Question 19

Margaret recently received a parking ticket.This is a common example of a local tax.

Accepted Answer

Parking tickets are considered fines or penalties for violating parking regulations, not taxes. Taxes are compulsory charges levied by a government for public purposes, while fines are punitive and meant to discourage illegal or unwanted behavior.

Question 20

The tax base for the federal income tax is taxable income.

Accepted Answer

The federal income tax is based on taxable income, which is calculated by subtracting allowable deductions from gross income.

Quiz 1: An Introduction to Tax