Question 1

Which of the following statements about vertical equity is false?

Accepted Answer

A)  Vertical equity focuses on a fair rate structure instead of a fair measurement of the tax base. 
B)  If persons with greater ability to pay owe more tax than persons with lesser ability to pay, the tax is vertically equitable. 
C)  A tax with a single percentage rate is not vertically equitable. 
D)  None of the above is false. 
A)  Vertical equity focuses on a fair rate structure instead of a fair measurement of the tax base. 
B)  If persons with greater ability to pay owe more tax than persons with lesser ability to pay, the tax is vertically equitable. 
C)  A tax with a single percentage rate is not vertically equitable. 
D)  None of the above is false.

Question 2

Supply-side economic theory holds that people who benefit from a tax rate reduction will spend their tax windfall on consumption goods.

Accepted Answer

A) True 
 B)False

Question 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
-Bilex Inc. owns real property valued at $629,800. Compute Bilex's tax on this property.

Accepted Answer

A)  $13,798 
B)  $7,500 
C)  $6,298 
D)  None of the choices are correct. 
A)  $13,798 
B)  $7,500 
C)  $6,298 
D)  None of the choices are correct.

Question 4

The federal government is not required to pay interest on the national debt.

Accepted Answer

A) True 
 B)False

Question 5

Tax liability divided by taxable income equals marginal tax rate.

Accepted Answer

A) True 
 B)False

Question 6

The government of Nation C operated at a $32 billion deficit this year. The deficit suggests that Nation C's tax system is:

Accepted Answer

A)  Inefficient 
B)  Insufficient 
C)  Unfair 
D)  Inconvenient 
A)  Inefficient 
B)  Insufficient 
C)  Unfair 
D)  Inconvenient

Question 7

Assume that Congress plans to amend the federal income tax to provide a deduction for the first $2,400 of residential rent paid by families with incomes below the federal poverty level. 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 8

Which of the following statements about the income and substitution effects of an income tax rate increase is true?

Accepted Answer

A)  The income and substitution effects are contradictory behavioral reactions. 
B)  From the government's perspective, the substitution effect is more desirable than the income effect. 
C)  Faith in the income effect is the foundation for supply-side economic theory. 
D)  Dynamic forecasts of incremental tax revenues must consider the potential income effect but not the potential substitution effect of a rate increase. 
A)  The income and substitution effects are contradictory behavioral reactions. 
B)  From the government's perspective, the substitution effect is more desirable than the income effect. 
C)  Faith in the income effect is the foundation for supply-side economic theory. 
D)  Dynamic forecasts of incremental tax revenues must consider the potential income effect but not the potential substitution effect of a rate increase.

Question 9

Congress recently amended the tax law to make it easier for individuals to file their income tax returns electronically (online). 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 10

Which of the following taxes is most convenient for individuals to pay?

Accepted Answer

A)  Sales tax 
B)  Use tax 
C)  Federal income tax 
D)  Real property tax 
A)  Sales tax 
B)  Use tax 
C)  Federal income tax 
D)  Real property tax

Question 11

Many taxpayers believe the income tax system is unfair because it is so complicated.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A)  Taxpayers will not change their behavior 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)  Taxpayers will not change their behavior 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 13

According to the classical concept of efficiency, an efficient tax should be neutral in its effect on free market allocations of economic resources.

Accepted Answer

A) True 
 B)False

Question 14

If a tax has a progressive rate structure, a taxpayer's average rate is greater than her marginal rate.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following describes a tax that meets the standard of convenience?

Accepted Answer

A)  A tax that the government can administer without excessive cost. 
B)  A tax that is easy for taxpayers to compute and pay. 
C)  A tax that minimizes the opportunity for noncompliance. 
D)  All of the above describe a convenient tax. 
A)  A tax that the government can administer without excessive cost. 
B)  A tax that is easy for taxpayers to compute and pay. 
C)  A tax that minimizes the opportunity for noncompliance. 
D)  All of the above describe a convenient tax.

Question 16

Which of the following statements concerning tax preferences is false?

Accepted Answer

A)  Tax preferences increase the complexity of the law. 
B)  Tax preferences raise additional revenue for the government. 
C)  Tax preferences are government subsidies for targeted taxpayer activities. 
D)  Tax preferences do not improve the accurate measurement of the tax base. 
A)  Tax preferences increase the complexity of the law. 
B)  Tax preferences raise additional revenue for the government. 
C)  Tax preferences are government subsidies for targeted taxpayer activities. 
D)  Tax preferences do not improve the accurate measurement of the tax base.

Question 17

Which of the following tax policies would increase the redistribution of wealth across society?

Accepted Answer

A)  Repealing the federal estate and gift taxes 
B)  Increasing the highest marginal income tax rate by 10% 
C)  Replacing the progressive income tax rate structure with a flat rate 
D)  Replacing the income tax with a national sales tax 
A)  Repealing the federal estate and gift taxes 
B)  Increasing the highest marginal income tax rate by 10% 
C)  Replacing the progressive income tax rate structure with a flat rate 
D)  Replacing the income tax with a national sales tax

Question 18

Which of the following statements concerning the standard of fairness is false?

Accepted Answer

A)  People who believe that a tax is unfair are more likely to evade the tax. 
B)  People believe that the federal income tax is unfair because it contains preferences available only to wealthy individuals. 
C)  The public perception that the federal income tax is unfair has decreased in recent decades. 
D)  None of the choices are false. 
A)  People who believe that a tax is unfair are more likely to evade the tax. 
B)  People believe that the federal income tax is unfair because it contains preferences available only to wealthy individuals. 
C)  The public perception that the federal income tax is unfair has decreased in recent decades. 
D)  None of the choices are false.

Question 19

Which of the following statements about tax rate structures is true?

Accepted Answer

A)  Regressive rate structures are illegal in the United States. 
B)  A tax with a graduated rate structure must be either regressive or progressive. 
C)  A proportionate rate structure is the only structure resulting in vertical equity. 
D)  None of the choices are true. 
A)  Regressive rate structures are illegal in the United States. 
B)  A tax with a graduated rate structure must be either regressive or progressive. 
C)  A proportionate rate structure is the only structure resulting in vertical equity. 
D)  None of the choices are true.

Question 20

Government J decides that it must increase its tax revenue. Which of the strategies could result in more revenue?

Accepted Answer

A)  Increase the rate of an existing tax. 
B)  Expand the base of an existing tax. 
C)  Enact a tax on a new base. 
D)  All of these strategies could result in more revenue for Government J. 
A)  Increase the rate of an existing tax. 
B)  Expand the base of an existing tax. 
C)  Enact a tax on a new base. 
D)  All of these strategies could result in more revenue for Government J.

Which of the following statements about vertical equity is false?

Supply-side economic theory holds that people who benefit from a tax rate reduction will spend their tax windfall on consumption goods.

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 -Bilex Inc. owns real property valued at $629,800. Compute Bilex's tax on this property.

The federal government is not required to pay interest on the national debt.

Tax liability divided by taxable income equals marginal tax rate.

The government of Nation C operated at a $32 billion deficit this year. The deficit suggests that Nation C's tax system is:

Assume that Congress plans to amend the federal income tax to provide a deduction for the first $2,400 of residential rent paid by families with incomes below the federal poverty level. Which of the following statements is true?

Which of the following statements about the income and substitution effects of an income tax rate increase is true?

Congress recently amended the tax law to make it easier for individuals to file their income tax returns electronically (online). Which of the following statements is true?

Which of the following taxes is most convenient for individuals to pay?

Many taxpayers believe the income tax system is unfair because it is so complicated.

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

According to the classical concept of efficiency, an efficient tax should be neutral in its effect on free market allocations of economic resources.

If a tax has a progressive rate structure, a taxpayer's average rate is greater than her marginal rate.

Which of the following describes a tax that meets the standard of convenience?

Which of the following statements concerning tax preferences is false?

Which of the following tax policies would increase the redistribution of wealth across society?

Which of the following statements concerning the standard of fairness is false?

Which of the following statements about tax rate structures is true?

Government J decides that it must increase its tax revenue. Which of the strategies could result in more revenue?

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 about vertical equity is false?

Supply-side economic theory holds that people who benefit from a tax rate reduction will spend their tax windfall on consumption goods.

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 -Bilex Inc. owns real property valued at $629,800. Compute Bilex's tax on this property.

The federal government is not required to pay interest on the national debt.

Tax liability divided by taxable income equals marginal tax rate.

The government of Nation C operated at a $32 billion deficit this year. The deficit suggests that Nation C's tax system is:

Assume that Congress plans to amend the federal income tax to provide a deduction for the first $2,400 of residential rent paid by families with incomes below the federal poverty level. Which of the following statements is true?

Which of the following statements about the income and substitution effects of an income tax rate increase is true?

Congress recently amended the tax law to make it easier for individuals to file their income tax returns electronically (online). Which of the following statements is true?

Which of the following taxes is most convenient for individuals to pay?

Many taxpayers believe the income tax system is unfair because it is so complicated.

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

According to the classical concept of efficiency, an efficient tax should be neutral in its effect on free market allocations of economic resources.

If a tax has a progressive rate structure, a taxpayer's average rate is greater than her marginal rate.

Which of the following describes a tax that meets the standard of convenience?

Which of the following statements concerning tax preferences is false?

Which of the following tax policies would increase the redistribution of wealth across society?

Which of the following statements concerning the standard of fairness is false?

Which of the following statements about tax rate structures is true?

Government J decides that it must increase its tax revenue. Which of the strategies could result in more revenue?

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

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 -Bilex Inc. owns real property valued at $629,800. Compute Bilex's tax on this property.