Exam 1: An Introduction to Tax

Ricky and Lucy are debating several types of taxes.Their debate has focused on the different types of tax rate structures and whether they are "fair." Please define each tax rate structure, provide examples of each structure, and discuss how each structure may be viewed with respect to vertical equity.

Which of the following is true regarding tax-advantaged assets?

The concept of tax sufficiency:

Jackson has the choice to invest in city of Mitchell bonds or Sundial, Inc.corporate bonds that pay 10 percent interest.Jackson is a single taxpayer who earns $55,000 annually.Assume that the city of Mitchell bonds and the Sundial, Inc.bonds have similar risk. Assume the original facts as given except that Jackson is a head of household taxpayer and the city of Mitchell pays interest of 8 percent.How would you advise Jackson to invest his money?

Congress recently approved a new, smaller budget for the IRS.What taxation concept evaluates the cost of administering our tax law?

Estimated tax payments are one way the federal income tax system addresses the "certainty" criterion in evaluating tax systems.

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 2019, how much federal tax will he owe? (Round your final answer to the nearest whole dollar.)(Use tax rate schedule.)

The income and substitution effects are two opposing effects that one could consider in static forecasting.

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 implicit tax would Curtis pay on the city of Athens bond?

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

Although the primary purpose of a tax system is to raise revenue, Congress uses the federal tax system for other purposes as well.Describe the other ways in which Congress uses the federal tax system.Be specific.

Consider the following tax rate structures.Is it horizontally equitable? Why or why not? Is it vertically equitable? Why or why not? Toxpayer Salary Total Tux Lucy 40,000 \ 4,500 Ricky 20,000 \ 4,500 Ethel 40,000 \ 4,500

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

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

Which of the following principles encourages a vertically equitable tax system?

Earmarked taxes are:

Regressive tax rate structures are typically considered to be vertically equitable.

Which of the following is a tax? I.A 1 percent 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.

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

Relative to explicit taxes, implicit taxes are much easier to estimate.