Question 1

Which of the following statements concerning a regressive tax rate structure is true?

Accepted Answer

A)  A regressive tax rate structure is justified by the tax policy of distributive justice. 
B)  A regressive rate structure is justified by the theory of the declining marginal utility of income. 
C)  Under a regressive rate structure, the average tax rate for high-income taxpayers is less than the marginal tax rate. 
D)  None of the above statements is true. 
A)  A regressive tax rate structure is justified by the tax policy of distributive justice. 
B)  A regressive rate structure is justified by the theory of the declining marginal utility of income. 
C)  Under a regressive rate structure, the average tax rate for high-income taxpayers is less than the marginal tax rate. 
D)  None of the above statements is true.

Question 2

Vervet County levies a real property tax based on the following schedule.   Which type of rate structure does this tax use?

Accepted Answer

A)  Proportionate 
B)  Regressive 
C)  Progressive 
D)  Dual-bracket 
A)  Proportionate 
B)  Regressive 
C)  Progressive 
D)  Dual-bracket

Question 3

A progressive rate structure and a proportionate rate structure both result in vertical equity across taxpayers.

Accepted Answer

A) True 
 B)False

Question 4

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 5

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?
A. The federal government will collect $6,400 additional revenue ($80,000 * 8% rate increase).
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?
B. The federal government will collect $1,100 less revenue ([$50,000 * 25%] - [$80,000 * 17%]).

Accepted Answer

A. The federal government will

Question 6

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 7

The theory of distributional justice is a rationale for a progressive income tax system.

Accepted Answer

A) True 
 B)False

Question 8

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 9

Supply-side economic theory

Accepted Answer

A)  Predicts that a decrease in the highest income tax rates will cause an increase in government revenues. 
B)  Is inconsistent with the substitution effect. 
C)  Was a clear failure following the Reagan administration tax cuts of the 1980s. 
D)  Predicts that taxpayers will save their tax windfall from a rate cut rather than spend or investment the windfall. 
A)  Predicts that a decrease in the highest income tax rates will cause an increase in government revenues. 
B)  Is inconsistent with the substitution effect. 
C)  Was a clear failure following the Reagan administration tax cuts of the 1980s. 
D)  Predicts that taxpayers will save their tax windfall from a rate cut rather than spend or investment the windfall.

Question 10

Tax liability divided by taxable income equals marginal tax rate.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

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 13

Jurisdiction F levies a 10% excise tax on the purchase of golf carts. The annual revenue from this tax averages $800,000 (10% * $8 million average annual golf cart purchases). Jurisdiction F is considering raising the tax rate to 12%. Which of the following statements is true?

Accepted Answer

A)  The rate increase will increase revenue by $160,000. 
B)  Based on a dynamic forecast, the rate increase will increase revenue by $160,000. 
C)  Based on a static forecast, the rate increase will increase revenue by $160,000. 
D)  None of the above is true. 
A)  The rate increase will increase revenue by $160,000. 
B)  Based on a dynamic forecast, the rate increase will increase revenue by $160,000. 
C)  Based on a static forecast, the rate increase will increase revenue by $160,000. 
D)  None of the above is true.

Question 14

A good tax should result in either horizontal or vertical equity across taxpayers.

Accepted Answer

A) True 
 B)False

Question 15

The sales tax laws of many states exempt the purchase of groceries and prescription drugs from tax. Such exemptions are intended to improve the:

Accepted Answer

A)  Convenience of the tax 
B)  Equity of the tax 
C)  Sufficiency of the tax 
D)  Neutrality of the tax 
A)  Convenience of the tax 
B)  Equity of the tax 
C)  Sufficiency of the tax 
D)  Neutrality of the tax

Question 16

Last year, Government G levied a 35% tax on individual income, and Mr. Slate paid $35,000 tax on his $100,000 income. This year, the government increased the tax rate to 40%. Which of the following statements is false?

Accepted Answer

A)  Based on a static forecast, government G should collect $5,000 additional tax from Mr. Slate this year. 
B)  If Mr. Slate took a second job to maintain his after-tax disposable income, his behavior illustrates a substitution effect of the rate increase. 
C)  If Mr. Slate took a second job to maintain his after-tax disposable income, government G should collect more than $5,000 additional tax from him this year. 
D)  If Mr. Slate sold an income-generating investment and used the money for personal consumption, his behavior illustrates a substitution effect of the rate increase. 
A)  Based on a static forecast, government G should collect $5,000 additional tax from Mr. Slate this year. 
B)  If Mr. Slate took a second job to maintain his after-tax disposable income, his behavior illustrates a substitution effect of the rate increase. 
C)  If Mr. Slate took a second job to maintain his after-tax disposable income, government G should collect more than $5,000 additional tax from him this year. 
D)  If Mr. Slate sold an income-generating investment and used the money for personal consumption, his behavior illustrates a substitution effect of the rate increase.

Question 17

Vervet County levies a real property tax based on the following schedule.   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 above is 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 above is false.

Question 18

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 19

The U.S. individual income tax has always used a progressive rate structure.

Accepted Answer

A) True 
 B)False

Question 20

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.

Which of the following statements concerning a regressive tax rate structure is true?

Vervet County levies a real property tax based on the following schedule. Which type of rate structure does this tax use?

A progressive rate structure and a proportionate rate structure both result in vertical equity across taxpayers.

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

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 theory of distributional justice is a rationale for a progressive income tax system.

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.

Supply-side economic theory

Tax liability divided by taxable income equals marginal tax rate.

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

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

Jurisdiction F levies a 10% excise tax on the purchase of golf carts. The annual revenue from this tax averages $800,000 (10% * $8 million average annual golf cart purchases). Jurisdiction F is considering raising the tax rate to 12%. Which of the following statements is true?

A good tax should result in either horizontal or vertical equity across taxpayers.

The sales tax laws of many states exempt the purchase of groceries and prescription drugs from tax. Such exemptions are intended to improve the:

Last year, Government G levied a 35% tax on individual income, and Mr. Slate paid $35,000 tax on his $100,000 income. This year, the government increased the tax rate to 40%. Which of the following statements is false?

Vervet County levies a real property tax based on the following schedule. Which of the following statements is false?

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

The U.S. individual income tax has always used a progressive rate structure.

Which of the following statements about vertical equity is false?

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 concerning a regressive tax rate structure is true?

Vervet County levies a real property tax based on the following schedule. Which type of rate structure does this tax use?

A progressive rate structure and a proportionate rate structure both result in vertical equity across taxpayers.

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

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 theory of distributional justice is a rationale for a progressive income tax system.

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.

Supply-side economic theory

Tax liability divided by taxable income equals marginal tax rate.

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

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

Jurisdiction F levies a 10% excise tax on the purchase of golf carts. The annual revenue from this tax averages $800,000 (10% * $8 million average annual golf cart purchases). Jurisdiction F is considering raising the tax rate to 12%. Which of the following statements is true?

A good tax should result in either horizontal or vertical equity across taxpayers.

The sales tax laws of many states exempt the purchase of groceries and prescription drugs from tax. Such exemptions are intended to improve the:

Last year, Government G levied a 35% tax on individual income, and Mr. Slate paid $35,000 tax on his $100,000 income. This year, the government increased the tax rate to 40%. Which of the following statements is false?

Vervet County levies a real property tax based on the following schedule. Which of the following statements is false?

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

The U.S. individual income tax has always used a progressive rate structure.

Which of the following statements about vertical equity is false?

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