Exam 1: An Introduction to Tax

Employers often withhold federal income taxes directly from workers' paychecks. This is an example of which principle in practice?

Which of the following is false?

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

Raquel recently overheard two journalism students discussing the merits of the federal tax system. One student offered as an example of unfairness a well-known politician's spouse, who paid little income tax, as most of the spouse's income was earned in the form of municipal bond interest. What type of taxes is the journalism student considering in his example? What type of taxes is he ignoring? Define each type of tax. What role does each type of tax play in calculating relative tax burdens? What role does each type of tax play in evaluating fairness?

Property taxes may be imposed on both real and personal property.

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

In terms of effective tax rates, the sales tax can be viewed as a regressive tax.

There are several different types of tax rates that taxpayers might use in different contexts. Describe each tax rate and how a taxpayer might use it.

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.)

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

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.

Nick and Jessica are married taxpayers that file married filing separately. Jessica earns $250,000 of taxable income per year. Nick earns $130,000 of taxable income per year. Using the appropriate U.S. tax rate schedule for year 2019, how much tax does each of them pay? What are their marginal and average tax rates? How much tax would they save, if any, if they filed jointly? (Round the tax rates to two decimal places, e.g., .12345 as 12.35 percent.)(Use tax rate schedule.)

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 ________.

Which of the following represents the largest percentage of average state tax revenue?

Sin taxes are:

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

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

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?

Eliminating the current system of withholding income taxes directly from employee paychecks would:

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