Exam 1: An Introduction to Tax

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 2019, what is his current marginal tax rate? (Use tax rate schedule.)

If Susie earns $750,000 in taxable income and files as head of household for year 2019, what is Susie's average tax rate (rounded)? (Use tax rate schedule.)

Curtis invests $250,000 in a city of Athens bond that pays 7 percent interest.Alternatively, Curtis could have invested the $250,000 in a bond recently issued by Initech, Inc.that pays 9 percent interest with similar risk as the city of Athens bond.Assume that Curtis's marginal tax rate is 24 percent. How much explicit tax would Curtis incur on interest earned on the Initech, Inc.bond?

Junior earns $80,000 taxable income as a regional circuit stock car driver and is taxed at an average rate of 25 percent (i.e., $20,000 of tax).If Congress increases the income tax rate such that Junior's average tax rate increases from 25 percent to 30 percent, how much more income tax will he pay assuming that the income effect is larger than the substitution effect? What effect will this tax rate change have on the tax base and tax collected? What will happen to the government's tax revenues if Junior chooses to spend more time pursuing his other passions besides work (e.g., earns only $60,000 in taxable income)in response to the tax rate change? What is the term that describes this type of reaction to a tax rate increase? (Round your answers to two decimal places.)

Mandy, the mayor of Bogart and a strong advocate of a clean downtown, is proposing an increase in the city sales tax from 7 percent to 50 percent on all packs of chewing gum purchased in Bogart.Based on the current gum sales, Mandy estimates that this tax will actually reduce the tax revenue on gum sales.What type of forecasting is Mandy using to derive her tax revenue estimates? What "effect" is her estimate based on? Does this necessarily imply that Mandy will be happy given her desire to have a clean downtown?

Bart is contemplating starting his own business.His new business would operate as a sole proprietorship and would require hiring several employees.Describe the employment-related taxes that Bart should be aware of as he starts his new business as a self-employed business owner.

Sin taxes are:

Jonah, a single taxpayer, earns $150,000 in taxable income and $10,000 in interest from an investment in city of Denver bonds.Using the U.S.tax rate schedule for year 2019, how much federal tax will he owe? What is his average tax rate? What is his effective tax rate? What is his current marginal tax rate? If Jonah earned an additional $40,000 of taxable income, what is his marginal tax rate on this income? (Round the tax rates to two decimal places, e.g., .12345 as 12.35 percent.)(Use tax rate schedule.)

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

A taxpayer's average tax rate is the most appropriate tax rate to use in tax planning.

Horizontal equity is defined in terms of taxpayers in similar situations whereas vertical equity is defined in terms of taxpayers in different situations.

A common example of an employment-related tax is the Medicare tax.

Determine if each of the following is a tax and why or why not. a.$2.50 toll paid on the Florida Turnpike b.$300 ticket for reckless driving c.1 percent local surcharge on hotel rooms to fund public roadways d.2 percent city surcharge on wages earned in the city of Philadelphia

Manny, a single taxpayer, earns $65,000 per year in taxable income and an additional $12,000 per year in city of Boston bonds.What is Manny's current marginal tax rate for 2019? (Use tax rate schedule.)

The estate tax is assessed based on the fair market values of transfers made during a taxpayer's life.

The 9^th Amendment to the U.S.Constitution removed all doubt that a federal income tax was allowed under the U.S.Constitution.

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

The city of Granby, Colorado, recently enacted a 1.5 percent surcharge on vacation cabin rentals that will fund the city's new elementary school.This surcharge is an example of ________.

Al believes that SUVs have negative social and environmental effects because of their increased carbon monoxide emissions.He proposes eliminating sales taxes on smaller automobiles in favor of higher sales taxes levied on SUVs.Al performs some calculations and comes to the conclusion that based on the current number of SUVs owned in the U.S., exactly the same amount of total sales tax will be collected under his reformed system.Which of the following concepts explains why Al's idea may not work?

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