Question 1

A tax should result in either horizontal or vertical equity across taxpayers.

Accepted Answer

A) True 
 B)False  False

Question 2

The state of California plans to amend its personal income tax laws to allow parents to reduce their tax by the cost of infant car seats. Which of the following statements is true?

Accepted Answer

A)  The amendment creates a tax preference for parents who purchase infant car seats. 
B)  The amendment is intended to change social behavior. 
C)  The amendment increases the neutrality of the tax law. 
D)  Both the amendment creates a tax preference for parents who purchase infant car seats and is also intended to change social behavior are true. 
A)  The amendment creates a tax preference for parents who purchase infant car seats. 
B)  The amendment is intended to change social behavior. 
C)  The amendment increases the neutrality of the tax law. 
D)  Both the amendment creates a tax preference for parents who purchase infant car seats and is also intended to change social behavior are true. D

Question 3

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

Accepted Answer

A. Ms. Vello's tax is $5,054 ($72,200 × 7%), and her average tax rate is 3.97% ($5,054 / $127,200).
B. Mr. Sui's tax is $973 ($13,900 × 7%), and his average tax rate is 1.41% ($973 / $68,900).
C. Willford has a progressive tax rate structure because the rate increases as the base increases.

Question 4

The U.S. individual income tax has always used a progressive rate structure.

Accepted Answer

A) True 
 B)False

Question 5

The federal Social Security tax burden on employees has not increased since 1990 because the tax rate has not increased since that year.

Accepted Answer

A) True 
 B)False

Question 6

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 7

Tax systems with regressive rate structures result in a proportionally heavier tax burden on persons with smaller tax bases.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following statements does not describe the Keynesian standard of tax efficiency?

Accepted Answer

A)  An efficient tax encourages economic growth. 
B)  An efficient tax encourages full employment. 
C)  An efficient tax encourages price-level stability. 
D)  All of the above describe the Keynesian standard of tax efficiency. 
A)  An efficient tax encourages economic growth. 
B)  An efficient tax encourages full employment. 
C)  An efficient tax encourages price-level stability. 
D)  All of the above describe the Keynesian standard of tax efficiency.

Question 9

A dynamic forecast of the revenue effect of a tax rate change assumes that the tax base does not change.

Accepted Answer

A) True 
 B)False

Question 10

Government L levies a 4% excise tax on restaurant meals. It is considering reducing the rate to 2% on meals served in restaurants that ban cigarette and cigar smoking and to increase the rate to 5% in restaurants that allow smoking. Which of the following statements is true?

Accepted Answer

A)  The rate change would improve the neutrality of the excise tax. 
B)  The rate change would improve the convenience of the tax. 
C)  The rate change is intended to affect social behavior. 
D)  Both the rate change would improve the convenience of the tax and the rate change is intended to affect social behavior are true. 
A)  The rate change would improve the neutrality of the excise tax. 
B)  The rate change would improve the convenience of the tax. 
C)  The rate change is intended to affect social behavior. 
D)  Both the rate change would improve the convenience of the tax and the rate change is intended to affect social behavior are true.

Question 11

State use taxes are more convenient for individual consumers than state sales taxes.

Accepted Answer

A) True 
 B)False

Question 12

A tax meets the standard of efficiency if it generates enough revenue to pay for the public goods and services provided by the government.

Accepted Answer

A) True 
 B)False

Question 13

The sales tax laws of many states exempt the purchase of groceries and prescription drugs from tax. Such exemptions are intended to improve the:

Accepted Answer

A)  Convenience of the tax 
B)  Equity of the tax 
C)  Sufficiency of the tax 
D)  Neutrality of the tax 
A)  Convenience of the tax 
B)  Equity of the tax 
C)  Sufficiency of the tax 
D)  Neutrality of the tax

Question 14

A progressive rate structure and a proportionate rate structure both result in vertical equity across taxpayers.

Accepted Answer

A) True 
 B)False

Question 15

Assume that Congress plans to amend the federal individual income tax to eliminate the deductions for medical care, educational savings, 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.

Question 16

The city of Hartwell spends about $3 million annually on snow removal. The city is considering amending its real property tax law to allow homeowners to offset the cost of private snow removal against their annual property tax liability. This amendment would affect the:

Accepted Answer

A)  Fairness of the tax 
B)  Efficiency of the tax 
C)  Sufficiency of the tax 
D)  Convenience of the tax 
A)  Fairness of the tax 
B)  Efficiency of the tax 
C)  Sufficiency of the tax 
D)  Convenience of the tax

Question 17

A convenient tax has low compliance costs for taxpayers and low collection and enforcement costs for the government.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

A static forecast of the incremental revenue from a tax rate increase presumes that:

Accepted Answer

A)  The tax base will not change because of the rate increase. 
B)  The tax base will increase by the same proportion as the rate increase. 
C)  The tax base will decrease by the same proportion as the rate increase. 
D)  The tax rate and the tax base are correlated. 
A)  The tax base will not change because of the rate increase. 
B)  The tax base will increase by the same proportion as the rate increase. 
C)  The tax base will decrease by the same proportion as the rate increase. 
D)  The tax rate and the tax base are correlated.

Question 20

The country of Valhalla levies an income tax with the following rate structure.
Rate Income bracket
5% $-0- to $50,000+ 10% $50,001 to $150,000+ 20% $150,001 and above
A. Mrs Greene's annual income is $125,000. Compute her tax, her average tax rate, and her marginal tax rate.
B. Mr Chen's annual income is $220,000. Compute his tax, his average tax rate, and his marginal tax rate.
C. Does Valhalla have a proportionate, progressive, or regressive tax rate structure?

Accepted Answer

A. Mrs Greene's tax is $10,000 = (5% × $

A tax should result in either horizontal or vertical equity across taxpayers.

The state of California plans to amend its personal income tax laws to allow parents to reduce their tax by the cost of infant car seats. Which of the following statements is true?

The U.S. individual income tax has always used a progressive rate structure.

The federal Social Security tax burden on employees has not increased since 1990 because the tax rate has not increased since that year.

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?

Tax systems with regressive rate structures result in a proportionally heavier tax burden on persons with smaller tax bases.

Which of the following statements does not describe the Keynesian standard of tax efficiency?

A dynamic forecast of the revenue effect of a tax rate change assumes that the tax base does not change.

Government L levies a 4% excise tax on restaurant meals. It is considering reducing the rate to 2% on meals served in restaurants that ban cigarette and cigar smoking and to increase the rate to 5% in restaurants that allow smoking. Which of the following statements is true?

State use taxes are more convenient for individual consumers than state sales taxes.

A tax meets the standard of efficiency if it generates enough revenue to pay for the public goods and services provided by the government.

The sales tax laws of many states exempt the purchase of groceries and prescription drugs from tax. Such exemptions are intended to improve the:

A progressive rate structure and a proportionate rate structure both result in vertical equity across taxpayers.

Assume that Congress plans to amend the federal individual income tax to eliminate the deductions for medical care, educational savings, charitable contributions, and home mortgage interest. Which of the following statements is true?

The city of Hartwell spends about $3 million annually on snow removal. The city is considering amending its real property tax law to allow homeowners to offset the cost of private snow removal against their annual property tax liability. This amendment would affect the:

A convenient tax has low compliance costs for taxpayers and low collection and enforcement costs for the government.

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

A static forecast of the incremental revenue from a tax rate increase presumes that:

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

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

A tax should result in either horizontal or vertical equity across taxpayers.

The state of California plans to amend its personal income tax laws to allow parents to reduce their tax by the cost of infant car seats. Which of the following statements is true?

The U.S. individual income tax has always used a progressive rate structure.

The federal Social Security tax burden on employees has not increased since 1990 because the tax rate has not increased since that year.

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?

Tax systems with regressive rate structures result in a proportionally heavier tax burden on persons with smaller tax bases.

Which of the following statements does not describe the Keynesian standard of tax efficiency?

A dynamic forecast of the revenue effect of a tax rate change assumes that the tax base does not change.

Government L levies a 4% excise tax on restaurant meals. It is considering reducing the rate to 2% on meals served in restaurants that ban cigarette and cigar smoking and to increase the rate to 5% in restaurants that allow smoking. Which of the following statements is true?

State use taxes are more convenient for individual consumers than state sales taxes.

A tax meets the standard of efficiency if it generates enough revenue to pay for the public goods and services provided by the government.

The sales tax laws of many states exempt the purchase of groceries and prescription drugs from tax. Such exemptions are intended to improve the:

A progressive rate structure and a proportionate rate structure both result in vertical equity across taxpayers.

Assume that Congress plans to amend the federal individual income tax to eliminate the deductions for medical care, educational savings, charitable contributions, and home mortgage interest. Which of the following statements is true?

The city of Hartwell spends about $3 million annually on snow removal. The city is considering amending its real property tax law to allow homeowners to offset the cost of private snow removal against their annual property tax liability. This amendment would affect the:

A convenient tax has low compliance costs for taxpayers and low collection and enforcement costs for the government.

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

A static forecast of the incremental revenue from a tax rate increase presumes that:

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

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