Question 1

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. C

Question 2

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

Accepted Answer

A) True 
 B)False  False

Question 3

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 4

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 5

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 6

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 7

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 8

State use taxes are more convenient for individual consumers than state sales taxes.

Accepted Answer

A) True 
 B)False

Question 9

The statement that "an old tax is a good tax" means that:

Accepted Answer

A)  Changes in the tax law create uncertainty in the business environment. 
B)  Changes in the tax law disrupt traditional planning strategies. 
C)  Changes in the tax law increase the compliance burden on businesses. 
D)  All of the above. 
A)  Changes in the tax law create uncertainty in the business environment. 
B)  Changes in the tax law disrupt traditional planning strategies. 
C)  Changes in the tax law increase the compliance burden on businesses. 
D)  All of the above.

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Tax systems with regressive rate structures result in a proportionally heavier tax burden on persons with smaller tax bases.

Accepted Answer

A) True 
 B)False

Question 12

Jurisdiction M imposes an individual income tax based on the following schedule.   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 13

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 14

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 15

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

Accepted Answer

A) True 
 B)False

Question 16

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 17

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 18

A convenient tax has low compliance costs for taxpayers and low collection and enforcement costs for the government.

Accepted Answer

A) True 
 B)False

Question 19

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 20

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

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

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

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

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 the income and substitution effects of an income tax rate increase is true?

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

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.

State use taxes are more convenient for individual consumers than state sales taxes.

The statement that "an old tax is a good tax" means that:

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

Tax systems with regressive rate structures result in a proportionally heavier tax burden on persons with smaller tax bases.

Jurisdiction M imposes an individual income tax based on the following schedule. Which type of rate structure does this tax use?

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

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

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

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

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

A convenient tax has low compliance costs for taxpayers and low collection and enforcement costs for the government.

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

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

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

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

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

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

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 the income and substitution effects of an income tax rate increase is true?

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

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.

State use taxes are more convenient for individual consumers than state sales taxes.

The statement that "an old tax is a good tax" means that:

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

Tax systems with regressive rate structures result in a proportionally heavier tax burden on persons with smaller tax bases.

Jurisdiction M imposes an individual income tax based on the following schedule. Which type of rate structure does this tax use?

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

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

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

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

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

A convenient tax has low compliance costs for taxpayers and low collection and enforcement costs for the government.

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

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

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