Question 1

The theory of distributional justice is a rationale for a progressive income tax system.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following statements concerning tax preferences is true?

Accepted Answer

A)  The annual revenue loss from federal tax preferences is quantified in the Tax Expenditures Budget. 
B)  Tax preferences increase the fairness of the tax law. 
C)  Tax preferences simplify the tax law. 
D)  Tax preferences make the tax law more neutral across taxpayers. 
A)  The annual revenue loss from federal tax preferences is quantified in the Tax Expenditures Budget. 
B)  Tax preferences increase the fairness of the tax law. 
C)  Tax preferences simplify the tax law. 
D)  Tax preferences make the tax law more neutral across taxpayers.

Question 3

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 4

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 5

According to the classical concept of efficiency, an efficient tax should be neutral in its effect on free market allocations of economic resources.

Accepted Answer

A) True 
 B)False

Question 6

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 7

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

Accepted Answer

A) True 
 B)False

Question 8

Jurisdiction M imposes an individual income tax based on the following schedule. $\begin{array}{rr}\text { Rate }&\text { Income bracket }\
58 & \$-0-\text { to } \$ 50,000 \
+88 & \$ 50,001 \text { to } \$ 200,000 \
+128 & \$ 200,001 \text { and above }
\end{array}$ 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 9

Assume that Congress plans to amend the federal income tax to provide a deduction for the cost of energy-efficient fluorescent light bulbs. Which of the following statements is true?

Accepted Answer

A)  The amendment is intended to improve the efficiency of the tax. 
B)  The amendment is intended to improve the equity of the tax. 
C)  The amendment is intended to improve the simplicity of the tax. 
D)  The amendment is intended to improve the convenience of the tax. 
A)  The amendment is intended to improve the efficiency of the tax. 
B)  The amendment is intended to improve the equity of the tax. 
C)  The amendment is intended to improve the simplicity of the tax. 
D)  The amendment is intended to improve the convenience of the tax.

Question 10

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 11

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 12

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.Ms. Vello earned $127,200 income this year. Compute her city income tax and determine her average tax rate.Mr. Sui earned $68,900 income this year. Compute his city income tax and determine his average tax rate.Does Willford have a proportionate, progressive, or regressive tax rate structure?

Accepted Answer

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

Question 13

Jurisdiction M imposes an individual income tax based on the following schedule. $\begin{array}{rr}\text { Rate }&\text { Income bracket }\
58 & \$-0-\text { to } \$ 50,000 \
+88 & \$ 50,001 \text { to } \$ 200,000 \
+128 & \$ 200,001 \text { and above }
\end{array}$ Mr. Coen has $78,000 taxable income. Compute the tax on this income.

Accepted Answer

A)  $4,740 
B)  $6,240 
C)  $8,740 
D)  None of the choices are correct. 
A)  $4,740 
B)  $6,240 
C)  $8,740 
D)  None of the choices are correct.

Question 14

Jurisdiction F levies a 10% excise tax on the purchase of golf carts. The annual revenue from this tax averages $800,000 (10% * $8 million average annual golf cart purchases). Jurisdiction F is considering raising the tax rate to 12%. Which of the following statements is true?

Accepted Answer

A)  The rate increase will increase revenue by $160,000. 
B)  Based on a dynamic forecast, the rate increase will increase revenue by $160,000. 
C)  Based on a static forecast, the rate increase will increase revenue by $160,000. 
D)  None of these choices are true. 
A)  The rate increase will increase revenue by $160,000. 
B)  Based on a dynamic forecast, the rate increase will increase revenue by $160,000. 
C)  Based on a static forecast, the rate increase will increase revenue by $160,000. 
D)  None of these choices are true.

Question 15

Supply-side economic theory holds that people who benefit from a tax rate reduction will spend their tax windfall on consumption goods.

Accepted Answer

A) True 
 B)False

Question 16

Jurisdiction M imposes an individual income tax based on the following schedule. $\begin{array}{rr}\text { Rate }&\text { Income bracket }\
58 & \$-0-\text { to } \$ 50,000 \
+88 & \$ 50,001 \text { to } \$ 200,000 \
+128 & \$ 200,001 \text { and above }
\end{array}$ Which of the following statements is true?

Accepted Answer

A)  If Mrs. Hall's taxable income is $227,000, her average tax rate is 12%. 
B)  If Mr. Poe's taxable income is $41,200, his marginal tax rate is 8%. 
C)  If Ms. Kaye's taxable income is $63,800, her marginal tax rate is 8%. 
D)  None of the choices are correct. 
A)  If Mrs. Hall's taxable income is $227,000, her average tax rate is 12%. 
B)  If Mr. Poe's taxable income is $41,200, his marginal tax rate is 8%. 
C)  If Ms. Kaye's taxable income is $63,800, her marginal tax rate is 8%. 
D)  None of the choices are correct.

Question 17

Which of the following tax policies would increase the redistribution of wealth across society?

Accepted Answer

A)  Repealing the federal estate and gift taxes 
B)  Increasing the highest marginal income tax rate by 10% 
C)  Replacing the progressive income tax rate structure with a flat rate 
D)  Replacing the income tax with a national sales tax 
A)  Repealing the federal estate and gift taxes 
B)  Increasing the highest marginal income tax rate by 10% 
C)  Replacing the progressive income tax rate structure with a flat rate 
D)  Replacing the income tax with a national sales tax

Question 18

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 these choices are 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 these choices are false.

Question 19

Supply-side economic theory:

Accepted Answer

A)  Predicts that a decrease in the highest income tax rates will cause an increase in government revenues. 
B)  Is inconsistent with the substitution effect. 
C)  Was a clear failure following the Reagan administration tax cuts of the 1980s. 
D)  Predicts that taxpayers will save their tax windfall from a rate cut rather than spend or investment the windfall. 
A)  Predicts that a decrease in the highest income tax rates will cause an increase in government revenues. 
B)  Is inconsistent with the substitution effect. 
C)  Was a clear failure following the Reagan administration tax cuts of the 1980s. 
D)  Predicts that taxpayers will save their tax windfall from a rate cut rather than spend or investment the windfall.

Question 20

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.

The theory of distributional justice is a rationale for a progressive income tax system.

Which of the following statements concerning tax preferences is true?

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

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:

According to the classical concept of efficiency, an efficient tax should be neutral in its effect on free market allocations of economic resources.

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

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

Jurisdiction M imposes an individual income tax based on the following schedule. Rate Income bracket 58 \- 0- to \ 50,000 +88 \ 50,001 to \ 200,000 +128 \ 200,001 and above Ms. Owen has $314,000 taxable income. Compute the tax on this income.

Assume that Congress plans to amend the federal income tax to provide a deduction for the cost of energy-efficient fluorescent light bulbs. Which of the following statements is true?

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?

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

Jurisdiction M imposes an individual income tax based on the following schedule. Rate Income bracket 58 \- 0- to \ 50,000 +88 \ 50,001 to \ 200,000 +128 \ 200,001 and above Mr. Coen has $78,000 taxable income. Compute the tax on this income.

Jurisdiction F levies a 10% excise tax on the purchase of golf carts. The annual revenue from this tax averages $800,000 (10% * $8 million average annual golf cart purchases). Jurisdiction F is considering raising the tax rate to 12%. Which of the following statements is true?

Supply-side economic theory holds that people who benefit from a tax rate reduction will spend their tax windfall on consumption goods.

Jurisdiction M imposes an individual income tax based on the following schedule. Rate Income bracket 58 \- 0- to \ 50,000 +88 \ 50,001 to \ 200,000 +128 \ 200,001 and above Which of the following statements is true?

Which of the following tax policies would increase the redistribution of wealth across society?

Which of the following statements about vertical equity is false?

Supply-side economic theory:

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?

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 theory of distributional justice is a rationale for a progressive income tax system.

Which of the following statements concerning tax preferences is true?

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

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:

According to the classical concept of efficiency, an efficient tax should be neutral in its effect on free market allocations of economic resources.

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

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

Jurisdiction M imposes an individual income tax based on the following schedule. Rate Income bracket 58 \- 0- to \ 50,000 +88 \ 50,001 to \ 200,000 +128 \ 200,001 and above Ms. Owen has $314,000 taxable income. Compute the tax on this income.

Assume that Congress plans to amend the federal income tax to provide a deduction for the cost of energy-efficient fluorescent light bulbs. Which of the following statements is true?

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?

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

Jurisdiction M imposes an individual income tax based on the following schedule. Rate Income bracket 58 \- 0- to \ 50,000 +88 \ 50,001 to \ 200,000 +128 \ 200,001 and above Mr. Coen has $78,000 taxable income. Compute the tax on this income.

Jurisdiction F levies a 10% excise tax on the purchase of golf carts. The annual revenue from this tax averages $800,000 (10% * $8 million average annual golf cart purchases). Jurisdiction F is considering raising the tax rate to 12%. Which of the following statements is true?

Supply-side economic theory holds that people who benefit from a tax rate reduction will spend their tax windfall on consumption goods.

Jurisdiction M imposes an individual income tax based on the following schedule. Rate Income bracket 58 \- 0- to \ 50,000 +88 \ 50,001 to \ 200,000 +128 \ 200,001 and above Which of the following statements is true?

Which of the following tax policies would increase the redistribution of wealth across society?

Which of the following statements about vertical equity is false?

Supply-side economic theory:

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?

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