Question 1

Which of the following statements concerning income tax rate structures is false?

Accepted Answer

A) Under a progressive rate structure,the marginal rate and the average rate are equal. 
B) Under a regressive rate structure,the average rate for low-income individuals is more than the average rate for high-income individuals. 
C) Under either a regressive,proportionate,or progressive rate structure,high-income taxpayers pay more dollars of tax than low-income individuals. 
D) In theory,a progressive rate structure results in equal economic sacrifice across taxpayers. 
A) Under a progressive rate structure,the marginal rate and the average rate are equal. 
B) Under a regressive rate structure,the average rate for low-income individuals is more than the average rate for high-income individuals. 
C) Under either a regressive,proportionate,or progressive rate structure,high-income taxpayers pay more dollars of tax than low-income individuals. 
D) In theory,a progressive rate structure results in equal economic sacrifice across taxpayers.

Question 2

Government officials of Country Z estimate that next year's public programs will cost $19 million but that tax revenues will be only $15 million.Which of the following statements is false?

Accepted Answer

A) Country Z's tax system is sufficient. 
B) Country Z's government is engaging in deficit spending. 
C) If Country Z must borrow $4 million to pay for its public programs,its national debt will increase by $4 million. 
D) Country Z's government could balance its budget by eliminating a program that costs $4 million. 
A) Country Z's tax system is sufficient. 
B) Country Z's government is engaging in deficit spending. 
C) If Country Z must borrow $4 million to pay for its public programs,its national debt will increase by $4 million. 
D) Country Z's government could balance its budget by eliminating a program that costs $4 million.

Question 3

The city of Belleview operated at an $865,000 surplus this year.The surplus suggests that the municipal tax system is:

Accepted Answer

A) Fair 
B) Efficient 
C) Sufficient 
D) Convenient 
A) Fair 
B) Efficient 
C) Sufficient 
D) Convenient

Question 4

Changes in the tax law intended to make the measurement of taxable income more precise usually make the tax law less complex.

Accepted Answer

A) True 
 B)False

Question 5

Assume the state of California plans to amend its personal income tax laws to allow parents to reduce their tax by the cost of infant car seats.Which of the following statements is true?

Accepted Answer

A) The amendment creates a tax preference for parents who purchase infant car seats. 
B) The amendment is intended to change social behavior. 
C) The amendment increases the neutrality of the tax law. 
D) Both the amendment creates a tax preference for parents who purchase infant car seats and is also intended to change social behavior are true. 
A) The amendment creates a tax preference for parents who purchase infant car seats. 
B) The amendment is intended to change social behavior. 
C) The amendment increases the neutrality of the tax law. 
D) Both the amendment creates a tax preference for parents who purchase infant car seats and is also intended to change social behavior are true.

Question 6

The city of Hartwell spends about $3 million annually on snow removal.The city is considering amending its real property tax law to allow homeowners to offset the cost of private snow removal against their annual property tax liability.This amendment would affect the:

Accepted Answer

A) Fairness of the tax 
B) Efficiency of the tax 
C) Sufficiency of the tax 
D) Convenience of the tax 
A) Fairness of the tax 
B) Efficiency of the tax 
C) Sufficiency of the tax 
D) Convenience of the tax

Question 7

A tax meets the standard of efficiency if it generates enough revenue to pay for the public goods and services provided by the government.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following statements about the substitution effect of an income tax rate increase is false?

Accepted Answer

A) The substitution effect is theoretically stronger for high-income taxpayers than for low-income taxpayers. 
B) The substitution effect is theoretically stronger for a family's secondary wage earner than for the family's primary wage earner. 
C) The substitution effect is theoretically stronger for self-employed individuals who control their own time than for employees whose work schedules are controlled by their employers. 
D) None of the above is false. 
A) The substitution effect is theoretically stronger for high-income taxpayers than for low-income taxpayers. 
B) The substitution effect is theoretically stronger for a family's secondary wage earner than for the family's primary wage earner. 
C) The substitution effect is theoretically stronger for self-employed individuals who control their own time than for employees whose work schedules are controlled by their employers. 
D) None of the above is false.

Question 9

Jurisdiction M imposes an individual income tax based on the following schedule.   Ms.Owen has $314,000 taxable income.Compute the tax on this income.

Accepted Answer

A) $29,680 
B) $28,180 
C) $37,680 
D) None of the choices are correct. 
A) $29,680 
B) $28,180 
C) $37,680 
D) None of the choices are correct.

Question 10

Which of the following statements does not describe the classical standard of tax efficiency?

Accepted Answer

A) An efficient tax is a neutral factor in a free market economy. 
B) An efficient tax does not change taxpayer behavior. 
C) An efficient tax encourages full employment. 
D) An efficient tax favors a laissez-faire economy policy. 
A) An efficient tax is a neutral factor in a free market economy. 
B) An efficient tax does not change taxpayer behavior. 
C) An efficient tax encourages full employment. 
D) An efficient tax favors a laissez-faire economy policy.

Question 11

The federal income tax law allows individuals whose property is destroyed by a natural disaster such as a fire or hurricane to reduce their taxable income by the amount of their financial loss.This rule is intended to improve the:

Accepted Answer

A) Convenience of the tax 
B) Efficiency of the tax 
C) Horizontal equity of the tax 
D) Vertical equity of the tax 
A) Convenience of the tax 
B) Efficiency of the tax 
C) Horizontal equity of the tax 
D) Vertical equity of the tax

Question 12

Vervet County levies a real property tax based on the following schedule.   Which type of rate structure does this tax use?

Accepted Answer

A) Proportionate 
B) Regressive 
C) Progressive 
D) Dual-bracket 
A) Proportionate 
B) Regressive 
C) Progressive 
D) Dual-bracket

Question 13

Tax systems with regressive rate structures result in a proportionally heavier tax burden on persons with smaller tax bases.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following statements about the income and substitution effects of an income tax rate increase is true?

Accepted Answer

A) The income and substitution effects are contradictory behavioral reactions. 
B) From the government's perspective,the substitution effect is more desirable than the income effect. 
C) Faith in the income effect is the foundation for supply-side economic theory. 
D) Dynamic forecasts of incremental tax revenues must consider the potential income effect but not the potential substitution effect of a rate increase. 
A) The income and substitution effects are contradictory behavioral reactions. 
B) From the government's perspective,the substitution effect is more desirable than the income effect. 
C) Faith in the income effect is the foundation for supply-side economic theory. 
D) Dynamic forecasts of incremental tax revenues must consider the potential income effect but not the potential substitution effect of a rate increase.

Question 15

Which of the following statements regarding a convenient tax is false?

Accepted Answer

A) From the government's viewpoint,a good tax should be convenient to administer. 
B) From the taxpayer's viewpoint,a good tax should be convenient to pay. 
C) A convenient tax should have a method of collection that offers maximum opportunity for noncompliance. 
D) A convenient tax should permit taxpayers to compute their tax with reasonable certainty without incurring undue costs. 
A) From the government's viewpoint,a good tax should be convenient to administer. 
B) From the taxpayer's viewpoint,a good tax should be convenient to pay. 
C) A convenient tax should have a method of collection that offers maximum opportunity for noncompliance. 
D) A convenient tax should permit taxpayers to compute their tax with reasonable certainty without incurring undue costs.

Question 16

If a tax has a progressive rate structure,a taxpayer's average rate is greater than her marginal rate.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following statements about a proportionate income tax rate structure is false?

Accepted Answer

A) A theoretic justification for a proportionate rate is its superior potential for wealth redistribution. 
B) Under a proportionate rate structure,the marginal rate equals the average rate. 
C) Under a proportionate rate structure,the taxpayer with the least income pays the same percentage of income to the government as the taxpayer with the most income. 
D) None of the choices are false. 
A) A theoretic justification for a proportionate rate is its superior potential for wealth redistribution. 
B) Under a proportionate rate structure,the marginal rate equals the average rate. 
C) Under a proportionate rate structure,the taxpayer with the least income pays the same percentage of income to the government as the taxpayer with the most income. 
D) None of the choices are false.

Question 18

Mr.Ohno owns and operates a part-time service business that generates $80,000 annual taxable income.Assume that his federal tax rate on this income is 17%.Because of recent legislation,this rate will increase to 25% next year.
A.Based on a static forecast,how much additional revenue will the federal government collect from Mr.Ohno next year?
B.How much additional revenue will the federal government collect if Mr.Ohno decides to work fewer hours and consequently earns only $50,000 next year?

Accepted Answer

A.The federal government will

Question 19

Individuals who believe that a tax system is fair are less likely to cheat on their taxes than individuals who believe that the system is unfair.

Accepted Answer

A) True 
 B)False

Question 20

If a tax has a proportionate rate structure,a taxpayer's marginal rate and average rate are equal.

Accepted Answer

A) True 
 B)False

Which of the following statements concerning income tax rate structures is false?

Government officials of Country Z estimate that next year's public programs will cost $19 million but that tax revenues will be only $15 million.Which of the following statements is false?

The city of Belleview operated at an $865,000 surplus this year.The surplus suggests that the municipal tax system is:

Changes in the tax law intended to make the measurement of taxable income more precise usually make the tax law less complex.

Assume the state of California plans to amend its personal income tax laws to allow parents to reduce their tax by the cost of infant car seats.Which of the following statements is true?

The city of Hartwell spends about $3 million annually on snow removal.The city is considering amending its real property tax law to allow homeowners to offset the cost of private snow removal against their annual property tax liability.This amendment would affect the:

A tax meets the standard of efficiency if it generates enough revenue to pay for the public goods and services provided by the government.

Which of the following statements about the substitution effect of an income tax rate increase is false?

Jurisdiction M imposes an individual income tax based on the following schedule. Ms.Owen has $314,000 taxable income.Compute the tax on this income.

Which of the following statements does not describe the classical standard of tax efficiency?

The federal income tax law allows individuals whose property is destroyed by a natural disaster such as a fire or hurricane to reduce their taxable income by the amount of their financial loss.This rule is intended to improve the:

Vervet County levies a real property tax based on the following schedule. Which type of rate structure does this tax use?

Tax systems with regressive rate structures result in a proportionally heavier tax burden on persons with smaller tax bases.

Which of the following statements about the income and substitution effects of an income tax rate increase is true?

Which of the following statements regarding a convenient tax is false?

If a tax has a progressive rate structure,a taxpayer's average rate is greater than her marginal rate.

Which of the following statements about a proportionate income tax rate structure is false?

Individuals who believe that a tax system is fair are less likely to cheat on their taxes than individuals who believe that the system is unfair.

If a tax has a proportionate rate structure,a taxpayer's marginal rate and average rate are equal.

Taxes and Taxing Jurisdictions

Taxes As Transaction Costs

Maxims of Income Tax Planning

Tax Research

Taxable Income From Business Operations

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Nontaxable Exchanges

Sole Proprietorships, partnerships, llcs, and S Corporations

The Corporate Taxpayer

The Choice of Business Entity

Jurisdictional Issues in Business Taxation

The Individual Tax Formula

Compensation and Retirement Planning

Investment and Personal Financial Planning

Tax Consequences of Personal Activities

The Tax Compliance Process

Filters

Exam 2: Policy Standards for a Good Tax

Which of the following statements concerning income tax rate structures is false?

Government officials of Country Z estimate that next year's public programs will cost $19 million but that tax revenues will be only $15 million.Which of the following statements is false?

The city of Belleview operated at an $865,000 surplus this year.The surplus suggests that the municipal tax system is:

Changes in the tax law intended to make the measurement of taxable income more precise usually make the tax law less complex.

Assume the state of California plans to amend its personal income tax laws to allow parents to reduce their tax by the cost of infant car seats.Which of the following statements is true?

The city of Hartwell spends about $3 million annually on snow removal.The city is considering amending its real property tax law to allow homeowners to offset the cost of private snow removal against their annual property tax liability.This amendment would affect the:

A tax meets the standard of efficiency if it generates enough revenue to pay for the public goods and services provided by the government.

Which of the following statements about the substitution effect of an income tax rate increase is false?

Jurisdiction M imposes an individual income tax based on the following schedule. Ms.Owen has $314,000 taxable income.Compute the tax on this income.

Which of the following statements does not describe the classical standard of tax efficiency?

The federal income tax law allows individuals whose property is destroyed by a natural disaster such as a fire or hurricane to reduce their taxable income by the amount of their financial loss.This rule is intended to improve the:

Vervet County levies a real property tax based on the following schedule. Which type of rate structure does this tax use?

Tax systems with regressive rate structures result in a proportionally heavier tax burden on persons with smaller tax bases.

Which of the following statements about the income and substitution effects of an income tax rate increase is true?

Which of the following statements regarding a convenient tax is false?

If a tax has a progressive rate structure,a taxpayer's average rate is greater than her marginal rate.

Which of the following statements about a proportionate income tax rate structure is false?

Individuals who believe that a tax system is fair are less likely to cheat on their taxes than individuals who believe that the system is unfair.

If a tax has a proportionate rate structure,a taxpayer's marginal rate and average rate are equal.

Taxes and Taxing Jurisdictions

Taxes As Transaction Costs

Maxims of Income Tax Planning

Tax Research

Taxable Income From Business Operations

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Nontaxable Exchanges

Sole Proprietorships, partnerships, llcs, and S Corporations

The Corporate Taxpayer

The Choice of Business Entity

Jurisdictional Issues in Business Taxation

The Individual Tax Formula

Compensation and Retirement Planning

Investment and Personal Financial Planning

Tax Consequences of Personal Activities

The Tax Compliance Process

Filters