Exam 1: An Introduction to Tax

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.)

Manny, a single taxpayer, earns $70,000 per year in taxable income and an additional $12,500 per year in city of Boston bonds. What is Manny's current marginal tax rate for 2020? (Use tax rate schedule.)

A use tax is typically imposed by a state on goods purchased within the state.

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

Congress would like to increase tax revenues by 20 percent. Assume that the average taxpayer in the United States earns $80,000 and pays an average tax rate of 17.5 percent. If the income effect is larger than the substitution effect, what average tax rate will result in a 20 percent increase in tax revenues? This is an example of what type of forecasting?

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

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?

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

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

One must considerthe "economy" criterion in evaluating tax systems from both the taxpayer's and the government's perspective.

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 year 2020, what is his current marginal tax rate? (Use tax rate schedule.)

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

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 file married filing jointly in 2020, what would be their average tax rate? (Use tax rate schedule.)(Round your final answer to two decimal places.)

Bart is contemplating starting his own business. His new business would operate as a sole proprietorship and would require hiring several employees. Describe the employment-related taxes that Bart should be aware of as he starts his new business as a self-employed business owner.

Congress recently approved a new, smaller budget for the IRS. What taxation concept evaluates the cost of administering our tax law?

The tax base for the federal income tax is taxable income.

Jed Clampett is expanding his family-run beer distributorship into Georgia or Tennessee. His parents began the business many years ago and now three generations of Clampetts work in the family business. Jed will relocate the entire family (his parents, spouse, children, etc.)to either state after the move. What types of taxes may influence his decision of where to locate his business? What nontax factors may influence the decision?

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.

Fred and Wilma, married taxpayers, earn $100,000 in taxable income and $20,000 in interest from an investment in city of Bedrock bonds. Using the U.S. tax rate schedule for married filing jointly for year 2020, how much federal tax will they owe? What is their average tax rate? What is their effective tax rate? What is their current marginal tax rate? If Fred and Wilma earn an additional $40,000 of taxable income, what is their 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.)

Congress would like to increase tax revenues by 35 percent. Assume that the average taxpayer in the United States earns $58,000 and pays an average tax rate of 12 percent. If the income effect is larger than the substitution effect, what average tax rate will result in a 35 percent increase in tax revenues? This is an example of what type of forecasting?