Question 1

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  True

Question 2

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  False

Question 3

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 A

Question 4

Jurisdiction M imposes an individual income tax based on the following schedule.     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 5

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

Accepted Answer

A) Progressive rates increase as the tax base increases. 
B) Progressive rates reflect the theory of the declining marginal utility of income. 
C) The federal income tax has always used a progressive rate structure. 
D) Progressive rates result in greater vertical equity than a proportionate rate. 
A) Progressive rates increase as the tax base increases. 
B) Progressive rates reflect the theory of the declining marginal utility of income. 
C) The federal income tax has always used a progressive rate structure. 
D) Progressive rates result in greater vertical equity than a proportionate rate.

Question 6

Jurisdiction M imposes an individual income tax based on the following schedule.     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 7

Which of the following statements concerning income tax rate structures is false?

Accepted Answer

A) Under a progressive rate structure,the marginal rate and the average rate are equal. 
B) Under a regressive rate structure,the average rate for low-income individuals is more than the average rate for high-income individuals. 
C) Under either a regressive,proportionate,or progressive rate structure,high-income taxpayers pay more dollars of tax than low-income individuals. 
D) In theory,a progressive rate structure results in equal economic sacrifice across taxpayers. 
A) Under a progressive rate structure,the marginal rate and the average rate are equal. 
B) Under a regressive rate structure,the average rate for low-income individuals is more than the average rate for high-income individuals. 
C) Under either a regressive,proportionate,or progressive rate structure,high-income taxpayers pay more dollars of tax than low-income individuals. 
D) In theory,a progressive rate structure results in equal economic sacrifice across taxpayers.

Question 8

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 9

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 10

If a tax has a proportionate rate structure,a taxpayer's marginal rate and average rate are equal.

Accepted Answer

A) True 
 B)False

Question 11

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 12

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 13

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 14

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 15

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.

Question 16

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 17

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 18

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 A.and C.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 A.and C.are true.

Question 19

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 20

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.

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

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

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

Jurisdiction M imposes an individual income tax based on the following schedule. Mr.Coen has $78,000 taxable income.Compute the tax on this income.

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

Jurisdiction M imposes an individual income tax based on the following schedule. Which of the following statements is true?

Which of the following statements concerning income tax rate structures is false?

Which of the following statements concerning tax preferences 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:

If a tax has a proportionate rate structure,a taxpayer's marginal rate and average rate are equal.

Which of the following statements about vertical equity is false?

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

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

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

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

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

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?

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

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

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?

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, Partnerships, llcs, and S Corporations

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

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

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

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

Jurisdiction M imposes an individual income tax based on the following schedule. Mr.Coen has $78,000 taxable income.Compute the tax on this income.

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

Jurisdiction M imposes an individual income tax based on the following schedule. Which of the following statements is true?

Which of the following statements concerning income tax rate structures is false?

Which of the following statements concerning tax preferences 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:

If a tax has a proportionate rate structure,a taxpayer's marginal rate and average rate are equal.

Which of the following statements about vertical equity is false?

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

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

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

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

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

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?

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

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

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?

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, Partnerships, llcs, and S Corporations

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