Exam 1: An Introduction to Tax

Marc, a single taxpayer, earns $64,600 in taxable income and $5,460 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.)

Which of the following statements is true?

One key characteristic of a tax is that it is a required payment to a governmental agency.

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

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

Dynamic forecasting does not take into consideration taxpayers' responses to a tax change when estimating tax revenues.

Jackson has the choice to invest in city of Mitchell bonds or Sundial, Incorporated 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, Incorporated 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?

A sales tax is a common example of a progressive tax rate structure.

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 effective tax rate? (Round your final answer to two decimal places.)(Use tax rate schedule.)

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 2020, 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.)

One benefit of a sin tax (e.g., a tax on cigarettes)is that it should increase the demand for the products being taxed.

Curtis invests $250,000 in a city of Athens bond that pays 7 percent interest. Alternatively, Curtis could have invested the $250,000 in a bond recently issued by Initech, Incorporated that pays 9 percent interest with similar risk as the city of Athens bond. Assume that Curtis's marginal tax rate is 24 percent. How much explicit tax would Curtis incur on interest earned on the Initech, Incorporated bond?

The income and substitution effects are two opposing effects that one could consider in static forecasting.

Milton and Rocco are having a heated debate regarding a national sales tax. Milton argues that a national sales tax is a proportional, vertically equitable tax. Rocco argues that a national sales tax would be a regressive, vertically inequitable tax. Explain both sides of the argument.

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, how much federal tax will he owe? (Round your final answer to the nearest whole dollar.)(Use tax rate schedule.)

Curtis invests $250,000 in a city of Athens bond that pays 7 percent interest. Alternatively, Curtis could have invested the $250,000 in a bond recently issued by Initech, Incorporated that pays 9 percent interest with similar risk as the city of Athens bond. Assume that Curtis's marginal tax rate is 24 percent. If Curtis invested in the Initech, Incorporated bonds, what would be his after-tax rate of return from this investment?

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 earned an additional $30,000 of taxable income this year, what would be the marginal tax rate on the extra income for 2020? (Use tax rate schedule.)(Round your final answer to two decimal places.)

Curtis invests $250,000 in a city of Athens bond that pays 7 percent interest. Alternatively, Curtis could have invested the $250,000 in a bond recently issued by Initech, Incorporated that pays 9 percent interest with similar risk as the city of Athens bond. Assume that Curtis's marginal tax rate is 24 percent. How much implicit tax would Curtis pay on the city of Athens bond?

Marc, a single taxpayer, earns $63,400 in taxable income and $5,340 in interest from an investment in city of Birmingham bonds. Using the U.S. tax rate schedule for 2020, how much federal tax will he owe? (Round your final answer to the nearest whole dollar.)(Use tax rate schedule.)

Which of the following is not an example of a graduated tax rate structure?