Exam 1: An Introduction to Tax

The tax base for the federal income tax is taxable income.

Which of the following statements is true?

The largest federal tax,in terms of revenue collected,is the social security tax.

Leonardo,who is married but files separately,earns $80,000 of taxable income.He also has $15,000 in city of Tulsa bonds.His wife,Theresa,earns $50,000 of taxable income. If Leonardo instead had $30,000 of additional tax deductions for year 2017,his marginal tax rate on the deductions would be: (Use tax rate schedule in the text) 

Junior earns $80,000 taxable income as a regional circuit stock car driver and is taxed at an average rate of 25 percent (i.e.,$20,000 of tax).If Congress increases the income tax rate such that Junior's average tax rate increases from 25% to 30%,how much more income tax will he pay assuming that the income effect is larger than the substitution effect? What effect will this tax rate change have on the tax base and tax collected? What will happen to the government's tax revenues if Junior chooses to spend more time pursuing his other passions besides work (e.g.,earns only $60,000 in taxable income)in response to the tax rate change? What is the term that describes this type of reaction to a tax rate increase? (Round your answers to two decimal places.)

Jed Clampett is expanding his family-run beer distributorship into Georgia or Tennessee.His parents began the business many years ago and now three generations of Clampetts work in the family business.Jed will relocate the entire family (his parents,spouse,children,etc.)to either state after the move.What types of taxes may influence his decision of where to locate his business? What non-tax factors may influence the decision?

The concept of tax sufficiency:

Which of the following would not be a failure of the horizontal equity concept?

Marc,a single taxpayer,earns $60,000 in taxable income and $5,000 in interest from an investment in city of Birmingham Bonds.Using the U.S.tax rate schedule for year 2017,what is his average tax rate (rounded)? (Use tax rate schedule in the text)

Which of the following is not one of the basic tax rate structures?

Which of the following taxes represents the largest portion of U.S.Federal Tax revenues?

Employers often withhold federal income taxes directly from worker's paychecks.This is an example of which principle in practice?

One key characteristic of a tax is that it is a required payment to a governmental agency.

In a regressive tax rate system,the marginal tax rate will often be greater than the average tax rate.

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

If Susie earns $750,000 in taxable income and files as head of household for year 2017,what is Susie's average tax rate? (Use tax rate schedule in the text)

Fred and Wilma,married taxpayers,earn $100,000 in taxable income and $20,000 in interest from an investment in city of Bedrock Bonds.Using the U.S.tax rate schedule for married filing jointly for year 2017,how much federal tax will they owe? What is their average tax rate? What is their effective tax rate? What is their current marginal tax rate? If Fred and Wilma earn an additional $40,000 of taxable income,what is their marginal tax rate on this income? (Round the tax rates to 2 decimal places,e.g.,.12345 as 12.35%)(Use tax rate schedule in the text)

Regressive tax rate structures are typically considered to be vertically equitable.

Relative to explicit taxes,implicit taxes are much easier to estimate.

Sin taxes are: