Question 1

Congress originally enacted the federal estate and gift taxes to improve:

Accepted Answer

A)  Distributional justice 
B)  Economic efficiency 
C)  Vertical equity 
D)  Horizontal equity 
A)  Distributional justice 
B)  Economic efficiency 
C)  Vertical equity 
D)  Horizontal equity

Question 2

According to the Keynesian 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 3

The declining marginal utility of income across individuals can be measured empirically.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following statements concerning tax preferences is true?

Accepted Answer

A)  The annual revenue loss from federal tax preferences is quantified in the Tax Expenditures Budget. 
B)  Tax preferences increase the fairness of the tax law. 
C)  Tax preferences simplify the tax law. 
D)  Tax preferences make the tax law more neutral across taxpayers. 
A)  The annual revenue loss from federal tax preferences is quantified in the Tax Expenditures Budget. 
B)  Tax preferences increase the fairness of the tax law. 
C)  Tax preferences simplify the tax law. 
D)  Tax preferences make the tax law more neutral across taxpayers.

Question 5

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

Accepted Answer

A)  An efficient tax is a neutral factor in a free market economy. 
B)  An efficient tax does not change taxpayer behavior. 
C)  An efficient tax encourages full employment. 
D)  An efficient tax favors a laissez-faire economy policy. 
A)  An efficient tax is a neutral factor in a free market economy. 
B)  An efficient tax does not change taxpayer behavior. 
C)  An efficient tax encourages full employment. 
D)  An efficient tax favors a laissez-faire economy policy.

Question 6

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

Accepted Answer

A)  A theoretic justification for a proportionate rate is its superior potential for wealth redistribution. 
B)  Under a proportionate rate structure, the marginal rate equals the average rate. 
C)  Under a proportionate rate structure, the taxpayer with the least income pays the same percentage of income to the government as the taxpayer with the most income. 
D)  None of the choices are false. 
A)  A theoretic justification for a proportionate rate is its superior potential for wealth redistribution. 
B)  Under a proportionate rate structure, the marginal rate equals the average rate. 
C)  Under a proportionate rate structure, the taxpayer with the least income pays the same percentage of income to the government as the taxpayer with the most income. 
D)  None of the choices are false.

Question 7

Vertical equity focuses on measurement of the tax base, and horizontal equity focuses on the tax rate structure.

Accepted Answer

A) True 
 B)False

Question 8

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
-Which of the following statements is true?

Accepted Answer

A)  If Mrs Hall's taxable income is $227,000, her average tax rate is 12%. 
B)  If Mr. Poe's taxable income is $41,200, his marginal tax rate is 8%. 
C)  If Ms. Kaye's taxable income is $63,800, her marginal tax rate is 8%. 
D)  None of the choices are correct. 
A)  If Mrs Hall's taxable income is $227,000, her average tax rate is 12%. 
B)  If Mr. Poe's taxable income is $41,200, his marginal tax rate is 8%. 
C)  If Ms. Kaye's taxable income is $63,800, her marginal tax rate is 8%. 
D)  None of the choices are correct.

Question 9

Mr Ohno owns and operates a part-time service business that generates $80,000 annual taxable income. His federal tax rate on this income is 17%. Because of recent legislation, this rate will increase to 25% next year. 
A. Based on a static forecast, how much additional revenue will the federal government collect from Mr Ohno next year?
B. How much additional revenue will the federal government collect if Mr Ohno decides to work fewer hours and consequently earns only $50,000 next year?

Accepted Answer

A. The federal government will

Question 10

Jurisdiction P recently increased its income tax rate. A taxpayer who reacts to the increase by working harder to earn more income is demonstrating the income effect of the rate increase.

Accepted Answer

A) True 
 B)False

Question 11

A provision in the tax law designed to encourage a specific economic behavior is a tax preference.

Accepted Answer

A) True 
 B)False

Question 12

The city of Berne recently enacted a 10% tax on the price of a subway ticket. Consequently, Mrs Lane now walks to work instead of taking the subway. Her behavior illustrates the substitution effect of a tax increase.

Accepted Answer

A) True 
 B)False

Question 13

If State H increases its sales tax rate by 1%, its sales tax revenue must also increase by 1%.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following statements regarding a convenient tax is false?

Accepted Answer

A)  From the government's viewpoint, a good tax should be convenient to administer. 
B)  From the taxpayer's viewpoint, a good tax should be convenient to pay. 
C)  A convenient tax should have a method of collection that offers maximum opportunity for noncompliance. 
D)  A convenient tax should permit taxpayers to compute their tax with reasonable certainty without incurring undue costs. 
A)  From the government's viewpoint, a good tax should be convenient to administer. 
B)  From the taxpayer's viewpoint, a good tax should be convenient to pay. 
C)  A convenient tax should have a method of collection that offers maximum opportunity for noncompliance. 
D)  A convenient tax should permit taxpayers to compute their tax with reasonable certainty without incurring undue costs.

Question 15

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
-Which of the following statements is false?

Accepted Answer

A)  If Ms. Lui's taxable income is $33,400, her average tax rate is 5%. 
B)  If Mr. Bell's taxable income is $519,900, his marginal tax rate is 12%. 
C)  If Ms. Vern's taxable income is $188,000, her average tax rate is 7.2%. 
D)  None of the choices are false. 
A)  If Ms. Lui's taxable income is $33,400, her average tax rate is 5%. 
B)  If Mr. Bell's taxable income is $519,900, his marginal tax rate is 12%. 
C)  If Ms. Vern's taxable income is $188,000, her average tax rate is 7.2%. 
D)  None of the choices are false.

Question 16

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 of the following statements is false?

Accepted Answer

A)  If Mr. Clem owns real property valued at $112,500, his average tax rate is 3%. 
B)  If Ms. Barker owns real property valued at $455,650, her average tax rate is 2.1%. 
C)  If Ms. Lumley owns real property valued at $750,000, her marginal tax rate is 1%. 
D)  None of the choices are false. 
A)  If Mr. Clem owns real property valued at $112,500, his average tax rate is 3%. 
B)  If Ms. Barker owns real property valued at $455,650, her average tax rate is 2.1%. 
C)  If Ms. Lumley owns real property valued at $750,000, her marginal tax rate is 1%. 
D)  None of the choices are false.

Question 17

Individuals who believe that a tax system is fair are less likely to cheat on their taxes than individuals who believe that the system is unfair.

Accepted Answer

A) True 
 B)False

Question 18

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. The officials could avoid a deficit next year by adopting which of the following fiscal strategies?

Accepted Answer

A)  Reduce the cost of public programs by $4 million. 
B)  Increase taxes by $4 million. 
C)  Borrow $4 million by issuing new government bonds. 
D)  All of these strategies will avoid a deficit. 
A)  Reduce the cost of public programs by $4 million. 
B)  Increase taxes by $4 million. 
C)  Borrow $4 million by issuing new government bonds. 
D)  All of these strategies will avoid a deficit.

Question 19

The federal income tax law allows individuals whose property is destroyed by a natural disaster such as a fire or hurricane to reduce their taxable income by the amount of their financial loss. This rule is intended to improve the:

Accepted Answer

A)  Convenience of the tax 
B)  Efficiency of the tax 
C)  Horizontal equity of the tax 
D)  Vertical equity of the tax 
A)  Convenience of the tax 
B)  Efficiency of the tax 
C)  Horizontal equity of the tax 
D)  Vertical equity of the tax

Question 20

According to supply-side economic theory, a decrease in tax rates for high-income individuals could actually cause an increase in tax revenue.

Accepted Answer

A) True 
 B)False

Congress originally enacted the federal estate and gift taxes to improve:

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

The declining marginal utility of income across individuals can be measured empirically.

Which of the following statements concerning tax preferences is true?

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

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

Vertical equity focuses on measurement of the tax base, and horizontal equity focuses on the tax rate structure.

Jurisdiction P recently increased its income tax rate. A taxpayer who reacts to the increase by working harder to earn more income is demonstrating the income effect of the rate increase.

A provision in the tax law designed to encourage a specific economic behavior is a tax preference.

The city of Berne recently enacted a 10% tax on the price of a subway ticket. Consequently, Mrs Lane now walks to work instead of taking the subway. Her behavior illustrates the substitution effect of a tax increase.

If State H increases its sales tax rate by 1%, its sales tax revenue must also increase by 1%.

Which of the following statements regarding a convenient tax is false?

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 of the following statements is false?

Individuals who believe that a tax system is fair are less likely to cheat on their taxes than individuals who believe that the system is unfair.

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. The officials could avoid a deficit next year by adopting which of the following fiscal strategies?

The federal income tax law allows individuals whose property is destroyed by a natural disaster such as a fire or hurricane to reduce their taxable income by the amount of their financial loss. This rule is intended to improve the:

According to supply-side economic theory, a decrease in tax rates for high-income individuals could actually cause an increase in tax 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

Congress originally enacted the federal estate and gift taxes to improve:

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

The declining marginal utility of income across individuals can be measured empirically.

Which of the following statements concerning tax preferences is true?

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

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

Vertical equity focuses on measurement of the tax base, and horizontal equity focuses on the tax rate structure.

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 -Which of the following statements is true?

Jurisdiction P recently increased its income tax rate. A taxpayer who reacts to the increase by working harder to earn more income is demonstrating the income effect of the rate increase.

A provision in the tax law designed to encourage a specific economic behavior is a tax preference.

The city of Berne recently enacted a 10% tax on the price of a subway ticket. Consequently, Mrs Lane now walks to work instead of taking the subway. Her behavior illustrates the substitution effect of a tax increase.

If State H increases its sales tax rate by 1%, its sales tax revenue must also increase by 1%.

Which of the following statements regarding a convenient tax is false?

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 -Which of the following statements is false?

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 of the following statements is false?

Individuals who believe that a tax system is fair are less likely to cheat on their taxes than individuals who believe that the system is unfair.

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. The officials could avoid a deficit next year by adopting which of the following fiscal strategies?

The federal income tax law allows individuals whose property is destroyed by a natural disaster such as a fire or hurricane to reduce their taxable income by the amount of their financial loss. This rule is intended to improve the:

According to supply-side economic theory, a decrease in tax rates for high-income individuals could actually cause an increase in tax 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 -Which of the following statements is false?