Exam 1: An Introduction to Tax

Leonardo, who is married but files separately, earns $80,000 of taxable income. He also has $15,000 in city of Tulsa bonds. His wife, Theresa, earns $50,000 of taxable income. If Leonardo and his wife are married filing jointly in 2020, what is Leonardo and Theresa's effective tax rate for 2020? (Use tax rate schedule.)(Round your final answer to two decimal places.)

The effective tax rate, in general, provides a better depiction of a taxpayer's tax burden than the average tax rate.

Given the following tax structure, what is the minimum tax that would need to be assessed on Lizzy to make the tax progressive with respect to average tax rates? What is the minimum tax that would need to be assessed on Lizzy to make the tax progressive with respect to effective tax rates?

Which of the following is true regarding use taxes?

The two components of the tax calculation are the tax rate and the taxpayer's status.

Consider the following tax rate structure. Is it horizontally equitable? Why or why not? Is it vertically equitable? Why or why not?

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

While sales taxes are quite common, currently the U.S. federal government does not impose a sales tax.

Self-employment taxes are charged on self-employment income in addition to any federal income tax.

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?

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

The concept of tax sufficiency:

Heather, a single taxpayer who files as a head of household, earns $60,200 in taxable income and $5,200 in interest from an investment in city of Oxford bonds. Using the U.S. tax rate schedule for year 2020, how much federal tax will she owe? What is her average tax rate? What is her effective tax rate? What is her current marginal tax rate? If Heather has an additional $20,200 of tax deductions, what is her marginal tax rate on these deductions? (Round the tax rates to two decimal places, e.g., .12345 as 12.35 percent.)(Use tax rate schedule.)

Evaluate the U.S. federal tax system on the certainty and economy criteria.

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.

Which of the following is false?

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 2020, what is his average tax rate? (Round your final answer to two decimal places.)(Use tax rate schedule.)

A 1 percent charge imposed by a local government on football tickets sold is not considered a tax if all proceeds are earmarked to fund local schools.

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

If Susie earns $750,000 in taxable income and files as head of household for year 2020, what is Susie's average tax rate? (Use tax rate schedule.)(Round your final answer to two decimal places.)