Question 1

The declining marginal utility of income across individuals can be measured empirically.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following statements about vertical equity is false?

Accepted Answer

A) Vertical equity focuses on a fair rate structure instead of a fair measurement of the tax base. 
B) If persons with greater ability to pay owe more tax than persons with lesser ability to pay,the tax is vertically equitable. 
C) A tax with a single percentage rate is not vertically equitable. 
D) None of the above is false. 
A) Vertical equity focuses on a fair rate structure instead of a fair measurement of the tax base. 
B) If persons with greater ability to pay owe more tax than persons with lesser ability to pay,the tax is vertically equitable. 
C) A tax with a single percentage rate is not vertically equitable. 
D) None of the above is false.

Question 3

The sales tax laws of many states exempt the purchase of groceries and prescription drugs from tax.Such exemptions are intended to improve the:

Accepted Answer

A) Convenience of the tax 
B) Equity of the tax 
C) Sufficiency of the tax 
D) Neutrality of the tax 
A) Convenience of the tax 
B) Equity of the tax 
C) Sufficiency of the tax 
D) Neutrality of the tax

Question 4

Vervet County levies a real property tax based on the following schedule.   Bilex Inc.owns real property valued at $629,800.Compute Bilex's tax on this property.

Accepted Answer

A) $13,798 
B) $7,500 
C) $6,298 
D) None of the choices are correct. 
A) $13,798 
B) $7,500 
C) $6,298 
D) None of the choices are correct.

Question 5

Government J decides that it must increase its tax revenue.Which of the strategies could result in more revenue?

Accepted Answer

A) Increase the rate of an existing tax. 
B) Expand the base of an existing tax. 
C) Enact a tax on a new base. 
D) All of these strategies could result in more revenue for Government J. 
A) Increase the rate of an existing tax. 
B) Expand the base of an existing tax. 
C) Enact a tax on a new base. 
D) All of these strategies could result in more revenue for Government J.

Question 6

A static forecast of the revenue effect of a tax rate change assumes that the tax base does not change.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statements concerning the standard of fairness is false?

Accepted Answer

A) People who believe that a tax is unfair are more likely to evade the tax. 
B) People believe that the federal income tax is unfair because it contains preferences available only to wealthy individuals. 
C) The public perception that the federal income tax is unfair has decreased in recent decades. 
D) None of the choices are false. 
A) People who believe that a tax is unfair are more likely to evade the tax. 
B) People believe that the federal income tax is unfair because it contains preferences available only to wealthy individuals. 
C) The public perception that the federal income tax is unfair has decreased in recent decades. 
D) None of the choices are false.

Question 8

The statement that "an old tax is a good tax" means that:

Accepted Answer

A) Changes in the tax law create uncertainty in the business environment. 
B) Changes in the tax law disrupt traditional planning strategies. 
C) Changes in the tax law increase the compliance burden on businesses. 
D) All of the above. 
A) Changes in the tax law create uncertainty in the business environment. 
B) Changes in the tax law disrupt traditional planning strategies. 
C) Changes in the tax law increase the compliance burden on businesses. 
D) All of the above.

Question 9

Last year,Government G levied a 35% tax on individual income,and Mr.Slate paid $35,000 tax on his $100,000 income.This year,the government increased the tax rate to 40%.Which of the following statements is false?

Accepted Answer

A) Based on a static forecast,government G should collect $5,000 additional tax from Mr.Slate this year. 
B) If Mr.Slate took a second job to maintain his after-tax disposable income,his behavior illustrates a substitution effect of the rate increase. 
C) If Mr.Slate took a second job to maintain his after-tax disposable income,government G should collect more than $5,000 additional tax from him this year. 
D) If Mr.Slate sold an income-generating investment and used the money for personal consumption,his behavior illustrates a substitution effect of the rate increase. 
A) Based on a static forecast,government G should collect $5,000 additional tax from Mr.Slate this year. 
B) If Mr.Slate took a second job to maintain his after-tax disposable income,his behavior illustrates a substitution effect of the rate increase. 
C) If Mr.Slate took a second job to maintain his after-tax disposable income,government G should collect more than $5,000 additional tax from him this year. 
D) If Mr.Slate sold an income-generating investment and used the money for personal consumption,his behavior illustrates a substitution effect of the rate increase.

Question 10

If State H increases its sales tax rate by 1%,its sales tax revenue must also increase by 1%.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following statements concerning the federal Social Security tax is true?

Accepted Answer

A) The tax burden increases annually because the rate generally increases annually. 
B) The tax burden increases annually because the base generally increases annually. 
C) Both the rate and the base generally increase annually. 
D) The Social Security tax burden has not increased since 1990. 
A) The tax burden increases annually because the rate generally increases annually. 
B) The tax burden increases annually because the base generally increases annually. 
C) Both the rate and the base generally increase annually. 
D) The Social Security tax burden has not increased since 1990.

Question 12

The government of Nation C operated at a $32 billion deficit this year.The deficit suggests that Nation C's tax system is:

Accepted Answer

A) Inefficient 
B) Insufficient 
C) Unfair 
D) Inconvenient 
A) Inefficient 
B) Insufficient 
C) Unfair 
D) Inconvenient

Question 13

A tax meets the standard of sufficiency if it is easy for people to pay the tax.

Accepted Answer

A) True 
 B)False

Question 14

State use taxes are more convenient for individual consumers than state sales taxes.

Accepted Answer

A) True 
 B)False

Question 15

The City of Willford levies a flat 7% tax on individual income in excess of $55,000.Individuals who earn $55,000 or less pay no income tax.
A.Ms.Vello earned $127,200 income this year.Compute her city income tax and determine her average tax rate.
B.Mr.Sui earned $68,900 income this year.Compute his city income tax and determine his average tax rate.
C.Does Willford have a proportionate,progressive,or regressive tax rate structure?

Accepted Answer

A.Ms.Vello's tax is $5,054 ($72,200 × 7%

Question 16

A provision in the tax law designed to encourage a specific economic behavior is a tax preference.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following describes a tax that meets the standard of convenience?

Accepted Answer

A) A tax that the government can administer without excessive cost. 
B) A tax that is easy for taxpayers to compute and pay. 
C) A tax that minimizes the opportunity for noncompliance. 
D) All of the above describe a convenient tax. 
A) A tax that the government can administer without excessive cost. 
B) A tax that is easy for taxpayers to compute and pay. 
C) A tax that minimizes the opportunity for noncompliance. 
D) All of the above describe a convenient tax.

Question 18

The Internal Revenue Service's cost of collecting $100 of tax revenue is about $3.

Accepted Answer

A) True 
 B)False

Question 19

Assume that Congress plans to amend the federal individual income tax to eliminate the deductions for medical care,charitable contributions,and home mortgage interest.Which of the following statements is true?

Accepted Answer

A) The amendment will reduce the complexity of the tax. 
B) The amendment will increase the horizontal equity of the tax. 
C) The amendment will increase the neutrality of the tax. 
D) Both the amendment will reduce the complexity of the tax and will increase the neutrality of the tax. 
A) The amendment will reduce the complexity of the tax. 
B) The amendment will increase the horizontal equity of the tax. 
C) The amendment will increase the neutrality of the tax. 
D) Both the amendment will reduce the complexity of the tax and will increase the neutrality of the tax.

Question 20

A dynamic forecast of the revenue effect of a tax rate change assumes that the tax base does not change.

Accepted Answer

A) True 
 B)False

The declining marginal utility of income across individuals can be measured empirically.

Which of the following statements about vertical equity is false?

The sales tax laws of many states exempt the purchase of groceries and prescription drugs from tax.Such exemptions are intended to improve the:

Vervet County levies a real property tax based on the following schedule. Bilex Inc.owns real property valued at $629,800.Compute Bilex's tax on this property.

Government J decides that it must increase its tax revenue.Which of the strategies could result in more revenue?

A static forecast of the revenue effect of a tax rate change assumes that the tax base does not change.

Which of the following statements concerning the standard of fairness is false?

The statement that "an old tax is a good tax" means that:

Last year,Government G levied a 35% tax on individual income,and Mr.Slate paid $35,000 tax on his $100,000 income.This year,the government increased the tax rate to 40%.Which of the following statements is false?

If State H increases its sales tax rate by 1%,its sales tax revenue must also increase by 1%.

Which of the following statements concerning the federal Social Security tax is true?

The government of Nation C operated at a $32 billion deficit this year.The deficit suggests that Nation C's tax system is:

A tax meets the standard of sufficiency if it is easy for people to pay the tax.

State use taxes are more convenient for individual consumers than state sales taxes.

A provision in the tax law designed to encourage a specific economic behavior is a tax preference.

Which of the following describes a tax that meets the standard of convenience?

The Internal Revenue Service's cost of collecting $100 of tax revenue is about $3.

Assume that Congress plans to amend the federal individual income tax to eliminate the deductions for medical care,charitable contributions,and home mortgage interest.Which of the following statements is true?

A dynamic forecast of the revenue effect of a tax rate change assumes that the tax base does not change.

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

The declining marginal utility of income across individuals can be measured empirically.

Which of the following statements about vertical equity is false?

The sales tax laws of many states exempt the purchase of groceries and prescription drugs from tax.Such exemptions are intended to improve the:

Vervet County levies a real property tax based on the following schedule. Bilex Inc.owns real property valued at $629,800.Compute Bilex's tax on this property.

Government J decides that it must increase its tax revenue.Which of the strategies could result in more revenue?

A static forecast of the revenue effect of a tax rate change assumes that the tax base does not change.

Which of the following statements concerning the standard of fairness is false?

The statement that "an old tax is a good tax" means that:

Last year,Government G levied a 35% tax on individual income,and Mr.Slate paid $35,000 tax on his $100,000 income.This year,the government increased the tax rate to 40%.Which of the following statements is false?

If State H increases its sales tax rate by 1%,its sales tax revenue must also increase by 1%.

Which of the following statements concerning the federal Social Security tax is true?

The government of Nation C operated at a $32 billion deficit this year.The deficit suggests that Nation C's tax system is:

A tax meets the standard of sufficiency if it is easy for people to pay the tax.

State use taxes are more convenient for individual consumers than state sales taxes.

A provision in the tax law designed to encourage a specific economic behavior is a tax preference.

Which of the following describes a tax that meets the standard of convenience?

The Internal Revenue Service's cost of collecting $100 of tax revenue is about $3.

Assume that Congress plans to amend the federal individual income tax to eliminate the deductions for medical care,charitable contributions,and home mortgage interest.Which of the following statements is true?

A dynamic forecast of the revenue effect of a tax rate change assumes that the tax base does not change.

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