Exam 1: An Introduction to Tax

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 is true?

The substitution effect:

If Susie earns $772,000 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.)

Al believes that SUVs have negative social and environmental effects because of their increased carbon monoxide emissions. He proposes eliminating sales taxes on smaller automobiles in favor of higher sales taxes levied on SUVs. Al performs some calculations and comes to the conclusion that based on the current number of SUVs owned in the U.S., exactly the same amount of total sales tax will be collected under his reformed system. Which of the following concepts explains why Al's idea may not work?

Which of the following is true regarding tax-advantaged assets?

Curtis invests $525,000 in a city of Athens bond that pays 7.50 percent interest. Alternatively, Curtis could have invested the $525,000 in a bond recently issued by Initech, Incorporated that pays 9.50 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?

Common examples of sin taxes include the taxes imposed on airline tickets and gasoline.

Jonah, a single taxpayer, earns $152,000 in taxable income and $12,000 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 $42,000 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.)

Geronimo files his tax return as a head of household for year 2020. If his taxable income is $77,000, what is his average tax rate? (Use tax rate schedule.)(Round your final answer to two decimal places.)

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

The largest federal tax, in terms of revenue collected, is the Social Security tax.

Which of the following is true regarding use taxes?

If Susie earns $750,000 in taxable income, how much tax will she pay as a single taxpayer for 2020? (Use tax rate schedule.)