Question 1

Which of the following statements concerning the federal Social Security tax is true?

Accepted Answer

A)  The tax burden increases annually because the rate generally increases annually. 
B)  The tax burden increases annually because the base generally increases annually. 
C)  Both the rate and the base generally increase annually. 
D)  The Social Security tax burden has not increased since 1990. 
A)  The tax burden increases annually because the rate generally increases annually. 
B)  The tax burden increases annually because the base generally increases annually. 
C)  Both the rate and the base generally increase annually. 
D)  The Social Security tax burden has not increased since 1990.

Question 2

Which of the following statements about the income effect of an income tax rate increase is true?

Accepted Answer

A)  The income effect is theoretically stronger for low-income taxpayers than for high-income taxpayers. 
B)  The income effect is theoretically stronger for a family's secondary wage earner than for the family's primary wage earner. 
C)  The income effect motivates individuals to find ways to increase their before-tax income. 
D)  Both the income effect is theoretically stronger for low-income taxpayers than for high-income taxpayers and the income effect motivates individuals to find ways to increase their before-tax income are true. 
A)  The income effect is theoretically stronger for low-income taxpayers than for high-income taxpayers. 
B)  The income effect is theoretically stronger for a family's secondary wage earner than for the family's primary wage earner. 
C)  The income effect motivates individuals to find ways to increase their before-tax income. 
D)  Both the income effect is theoretically stronger for low-income taxpayers than for high-income taxpayers and the income effect motivates individuals to find ways to increase their before-tax income are true.

Question 3

Jurisdiction M imposes an individual income tax based on the following schedule.
Rate $\quad$$\quad$Income bracket
5% $\quad$$\quad$ $\quad$ $-0- to $50,000
+ 8% $\quad$$\quad$$\quad$$50,001 to $200,000
+ 12% $\quad$$\quad$ $200,001 and above
Which type of rate structure does this tax use?

Accepted Answer

A)  Proportionate 
B)  Regressive 
C)  Progressive 
D)  Multi-bracket 
A)  Proportionate 
B)  Regressive 
C)  Progressive 
D)  Multi-bracket

Question 4

Last year, Government G levied a 35% tax on individual income, and Mr Slate paid $35,000 tax on his $100,000 income. This year, the government increased the tax rate to 40%. Which of the following statements is false?

Accepted Answer

A)  Based on a static forecast, government G should collect $5,000 additional tax from Mr. Slate this year. 
B)  If Mr. Slate took a second job to maintain his after-tax disposable income, his behavior illustrates a substitution effect of the rate increase. 
C)  If Mr. Slate took a second job to maintain his after-tax disposable income, government G should collect more than $5,000 additional tax from him this year. 
D)  If Mr. Slate sold an income-generating investment and used the money for personal consumption, his behavior illustrates a substitution effect of the rate increase. 
A)  Based on a static forecast, government G should collect $5,000 additional tax from Mr. Slate this year. 
B)  If Mr. Slate took a second job to maintain his after-tax disposable income, his behavior illustrates a substitution effect of the rate increase. 
C)  If Mr. Slate took a second job to maintain his after-tax disposable income, government G should collect more than $5,000 additional tax from him this year. 
D)  If Mr. Slate sold an income-generating investment and used the money for personal consumption, his behavior illustrates a substitution effect of the rate increase.

Question 5

Government officials of Country Z estimate that next year's public programs will cost $19 million but that tax revenues will be only $15 million. Which of the following statements is false?

Accepted Answer

A)  Country Z's tax system is sufficient. 
B)  Country Z's government is engaging in deficit spending. 
C)  If Country Z must borrow $4 million to pay for its public programs, its national debt will increase by $4 million. 
D)  Country Z's government could balance its budget by eliminating a program that costs $4 million. 
A)  Country Z's tax system is sufficient. 
B)  Country Z's government is engaging in deficit spending. 
C)  If Country Z must borrow $4 million to pay for its public programs, its national debt will increase by $4 million. 
D)  Country Z's government could balance its budget by eliminating a program that costs $4 million.

Question 6

Changes in the tax law intended to make the measurement of taxable income more precise usually make the tax law less complex.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statements about the substitution effect of an income tax rate increase is false?

Accepted Answer

A)  The substitution effect is theoretically stronger for high-income taxpayers than for low-income taxpayers. 
B)  The substitution effect is theoretically stronger for a family's secondary wage earner than for the family's primary wage earner. 
C)  The substitution effect is theoretically stronger for self-employed individuals who control their own time than for employees whose work schedules are controlled by their employers. 
D)  None of the above is false. 
A)  The substitution effect is theoretically stronger for high-income taxpayers than for low-income taxpayers. 
B)  The substitution effect is theoretically stronger for a family's secondary wage earner than for the family's primary wage earner. 
C)  The substitution effect is theoretically stronger for self-employed individuals who control their own time than for employees whose work schedules are controlled by their employers. 
D)  None of the above is false.

Question 8

A static 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 9

Jurisdiction M imposes an individual income tax based on the following schedule.
Rate $\quad$$\quad$$\quad$Income bracket
5% $\quad$$\quad$$\quad$$\quad$$-0- to $50,000
+ 8% $\quad$$\quad$$\quad$ $50,001 to $200,000
+ 12% $\quad$$\quad$$\quad$$200,001 and above
-Mr Coen has $78,000 taxable income. Compute the tax on this income.

Accepted Answer

A)  $4,740 
B)  $6,240 
C)  $8,740 
D)  None of the choices are correct. 
A)  $4,740 
B)  $6,240 
C)  $8,740 
D)  None of the choices are correct.

Question 10

A tax meets the standard of sufficiency if it is easy for people to pay the tax:

Accepted Answer

A) True 
 B)False

Question 11

The Internal Revenue Service's cost of collecting $100 of tax revenue is about $3.

Accepted Answer

A) True 
 B)False

Question 12

Vervet County levies a real property tax based on the following schedule.
Rate $\quad$$\quad$Assessed value
3% $\quad$$\quad$$-0- to $250,000
+ 1% $\quad$$250,001 and above
-Which type of rate structure does this tax use?

Accepted Answer

A)  Proportionate 
B)  Regressive 
C)  Progressive 
D)  Dual-bracket 
A)  Proportionate 
B)  Regressive 
C)  Progressive 
D)  Dual-bracket

Question 13

Which of the following statements concerning a regressive tax rate structure is true?

Accepted Answer

A)  A regressive tax rate structure is justified by the tax policy of distributive justice. 
B)  A regressive rate structure is justified by the theory of the declining marginal utility of income. 
C)  Under a regressive rate structure, the average tax rate for high-income taxpayers is less than the marginal tax rate. 
D)  None of the statements are true. 
A)  A regressive tax rate structure is justified by the tax policy of distributive justice. 
B)  A regressive rate structure is justified by the theory of the declining marginal utility of income. 
C)  Under a regressive rate structure, the average tax rate for high-income taxpayers is less than the marginal tax rate. 
D)  None of the statements are true.

Question 14

Jurisdiction M imposes an individual income tax based on the following schedule.
Rate$\quad$$\quad$$\quad$$\quad$ Income bracket
5% $\quad$$\quad$$\quad$$\quad$$\quad$$-0- to $50,000
+ 8% $\quad$$\quad$$\quad$$\quad$  $50,001 to $200,000
+ 12% $\quad$$\quad$$\quad$$\quad$$200,001 and above
Which of the following statements is true?

Accepted Answer

A)  The schedule provides no information as to whether Jurisdiction M's tax is horizontally equitable. 
B)  Jurisdiction M's tax is vertically equitable. 
C)  Jurisdiction M's tax is vertically equitable only for individuals with $50,000 or less taxable income. 
D)  Both "The schedule provides no information as to whether Jurisdiction M's tax is horizontally equitable" and "Jurisdiction M's tax is vertically equitable" are true. 
A)  The schedule provides no information as to whether Jurisdiction M's tax is horizontally equitable. 
B)  Jurisdiction M's tax is vertically equitable. 
C)  Jurisdiction M's tax is vertically equitable only for individuals with $50,000 or less taxable income. 
D)  Both "The schedule provides no information as to whether Jurisdiction M's tax is horizontally equitable" and "Jurisdiction M's tax is vertically equitable" are true.

Question 15

Which of the following statements about a regressive tax rate structure is false?

Accepted Answer

A)  A regressive rate structure cannot result in vertical equity. 
B)  Regressive rates decrease as the tax base increases. 
C)  A regressive rate structure places a proportionally heavier tax burden on taxpayers with smaller tax bases than persons with greater tax bases. 
D)  None of the above is false. 
A)  A regressive rate structure cannot result in vertical equity. 
B)  Regressive rates decrease as the tax base increases. 
C)  A regressive rate structure places a proportionally heavier tax burden on taxpayers with smaller tax bases than persons with greater tax bases. 
D)  None of the above is false.

Question 16

Jurisdiction F levies a 10% excise tax on the purchase of golf carts. The annual revenue from this tax averages $800,000 (10% * $8 million average annual golf cart purchases). Jurisdiction F is considering raising the tax rate to 12%. Which of the following statements is true?

Accepted Answer

A)  The rate increase will increase revenue by $160,000. 
B)  Based on a dynamic forecast, the rate increase will increase revenue by $160,000. 
C)  Based on a static forecast, the rate increase will increase revenue by $160,000. 
D)  None of the above is true. 
A)  The rate increase will increase revenue by $160,000. 
B)  Based on a dynamic forecast, the rate increase will increase revenue by $160,000. 
C)  Based on a static forecast, the rate increase will increase revenue by $160,000. 
D)  None of the above is true.

Question 17

Jurisdiction M imposes an individual income tax based on the following schedule.
Rate $\quad$$\quad$$\quad$Income bracket
5% $\quad$$\quad$$\quad$$\quad$$-0- to $50,000
+ 8% $\quad$$\quad$$\quad$ $50,001 to $200,000
+ 12% $\quad$$\quad$$\quad$$200,001 and above
-Ms.Owen has $314,000 taxable income. Compute the tax on this income.

Accepted Answer

A)  $29,680 
B)  $28,180 
C)  $37,680 
D)  None of the choices are correct. 
A)  $29,680 
B)  $28,180 
C)  $37,680 
D)  None of the choices are correct.

Question 18

Supply-side economic theory.

Accepted Answer

A)  Predicts that a decrease in the highest income tax rates will cause an increase in government revenues. 
B)  Is inconsistent with the substitution effect. 
C)  Was a clear failure following the Reagan administration tax cuts of the 1980s. 
D)  Predicts that taxpayers will save their tax windfall from a rate cut rather than spend or investment the windfall. 
A)  Predicts that a decrease in the highest income tax rates will cause an increase in government revenues. 
B)  Is inconsistent with the substitution effect. 
C)  Was a clear failure following the Reagan administration tax cuts of the 1980s. 
D)  Predicts that taxpayers will save their tax windfall from a rate cut rather than spend or investment the windfall.

Question 19

Mr and Mrs Boln earn $63,000 annual income and pay 20% in state and federal income tax. If tax rates increase so that the couple's annual rate increases to 25%, how much additional income must they earn to maintain their after-tax standard of living?

Accepted Answer

The Bolns' after-tax income before the r

Question 20

Which of the following statements about horizontal equity is false?

Accepted Answer

A)  Horizontal equity focuses on a rational and impartial measurement of the tax base. 
B)  Horizontal equity focuses on the measurement of taxpayers' ability to pay. 
C)  If persons with equal ability to pay a tax owe an equal amount of tax, the tax is horizontally equitable. 
D)  None of the above is false. 
A)  Horizontal equity focuses on a rational and impartial measurement of the tax base. 
B)  Horizontal equity focuses on the measurement of taxpayers' ability to pay. 
C)  If persons with equal ability to pay a tax owe an equal amount of tax, the tax is horizontally equitable. 
D)  None of the above is false.

Which of the following statements concerning the federal Social Security tax is true?

Which of the following statements about the income effect of an income tax rate increase is true?

Jurisdiction M imposes an individual income tax based on the following schedule. Rate $\quad$ $\quad$ Income bracket 5% $\quad$ $\quad$ $\quad$ $-0- to $50,000 + 8% $\quad$ $\quad$ $\quad$ $50,001 to $200,000 + 12% $\quad$ $\quad$ $200,001 and above Which type of rate structure does this tax use?

Last year, Government G levied a 35% tax on individual income, and Mr Slate paid $35,000 tax on his $100,000 income. This year, the government increased the tax rate to 40%. Which of the following statements is false?

Government officials of Country Z estimate that next year's public programs will cost $19 million but that tax revenues will be only $15 million. Which of the following statements is false?

Changes in the tax law intended to make the measurement of taxable income more precise usually make the tax law less complex.

Which of the following statements about the substitution effect of an income tax rate increase is false?

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

A tax meets the standard of sufficiency if it is easy for people to pay the tax:

The Internal Revenue Service's cost of collecting $100 of tax revenue is about $3.

Vervet County levies a real property tax based on the following schedule. Rate $\quad$ $\quad$ Assessed value 3% $\quad$ $\quad$ $-0- to $250,000 + 1% $\quad$ $250,001 and above -Which type of rate structure does this tax use?

Which of the following statements concerning a regressive tax rate structure is true?

Which of the following statements about a regressive tax rate structure is false?

Jurisdiction F levies a 10% excise tax on the purchase of golf carts. The annual revenue from this tax averages $800,000 (10% * $8 million average annual golf cart purchases). Jurisdiction F is considering raising the tax rate to 12%. Which of the following statements is true?

Supply-side economic theory.

Mr and Mrs Boln earn $63,000 annual income and pay 20% in state and federal income tax. If tax rates increase so that the couple's annual rate increases to 25%, how much additional income must they earn to maintain their after-tax standard of living?

Which of the following statements about horizontal equity is false?

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

Which of the following statements concerning the federal Social Security tax is true?

Which of the following statements about the income effect of an income tax rate increase is true?

Jurisdiction M imposes an individual income tax based on the following schedule. Rate \quad\quad Income bracket 5% \quad\quad \quad $-0- to $50,000 + 8% \quad\quad\quad $50,001 to $200,000 + 12% \quad\quad $200,001 and above Which type of rate structure does this tax use?

Last year, Government G levied a 35% tax on individual income, and Mr Slate paid $35,000 tax on his $100,000 income. This year, the government increased the tax rate to 40%. Which of the following statements is false?

Government officials of Country Z estimate that next year's public programs will cost $19 million but that tax revenues will be only $15 million. Which of the following statements is false?

Changes in the tax law intended to make the measurement of taxable income more precise usually make the tax law less complex.

Which of the following statements about the substitution effect of an income tax rate increase is false?

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

A tax meets the standard of sufficiency if it is easy for people to pay the tax:

The Internal Revenue Service's cost of collecting $100 of tax revenue is about $3.

Vervet County levies a real property tax based on the following schedule. Rate \quad\quad Assessed value 3% \quad\quad $-0- to $250,000 + 1% \quad $250,001 and above -Which type of rate structure does this tax use?

Which of the following statements concerning a regressive tax rate structure is true?

Which of the following statements about a regressive tax rate structure is false?

Jurisdiction F levies a 10% excise tax on the purchase of golf carts. The annual revenue from this tax averages $800,000 (10% * $8 million average annual golf cart purchases). Jurisdiction F is considering raising the tax rate to 12%. Which of the following statements is true?

Supply-side economic theory.

Mr and Mrs Boln earn $63,000 annual income and pay 20% in state and federal income tax. If tax rates increase so that the couple's annual rate increases to 25%, how much additional income must they earn to maintain their after-tax standard of living?

Which of the following statements about horizontal equity is false?

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

Jurisdiction M imposes an individual income tax based on the following schedule. Rate $\quad$ $\quad$ Income bracket 5% $\quad$ $\quad$ $\quad$ $-0- to $50,000 + 8% $\quad$ $\quad$ $\quad$ $50,001 to $200,000 + 12% $\quad$ $\quad$ $200,001 and above Which type of rate structure does this tax use?

Vervet County levies a real property tax based on the following schedule. Rate $\quad$ $\quad$ Assessed value 3% $\quad$ $\quad$ $-0- to $250,000 + 1% $\quad$ $250,001 and above -Which type of rate structure does this tax use?