Question 1

A dynamic forecast of the incremental revenue from a tax rate increase presumes that:

Accepted Answer

A)  Taxpayers will not change their behavior because of the rate increase. 
B)  The tax base will increase by the same proportion as the rate increase. 
C)  The tax base will decrease by the same proportion as the rate increase. 
D)  The tax rate and the tax base are correlated. 
A)  Taxpayers will not change their behavior because of the rate increase. 
B)  The tax base will increase by the same proportion as the rate increase. 
C)  The tax base will decrease by the same proportion as the rate increase. 
D)  The tax rate and the tax base are correlated.

Question 2

Jurisdiction M imposes an individual income tax based on the following schedule.   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 above is true. 
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 above is true.

Question 3

The government of Nation C operated at a $32 billion deficit this year. The deficit suggests that Nation C's tax system is:

Accepted Answer

A)  Inefficient 
B)  Insufficient 
C)  Unfair 
D)  Inconvenient 
A)  Inefficient 
B)  Insufficient 
C)  Unfair 
D)  Inconvenient

Question 4

Government L levies a 4% excise tax on restaurant meals. It is considering reducing the rate to 2% on meals served in restaurants that ban cigarette and cigar smoking and to increase the rate to 5% in restaurants that allow smoking. Which of the following statements is true?

Accepted Answer

A)  The rate change would improve the neutrality of the excise tax. 
B)  The rate change would improve the convenience of the tax. 
C)  The rate change is intended to affect social behavior. 
D)  Statements B. and C. are true. 
A)  The rate change would improve the neutrality of the excise tax. 
B)  The rate change would improve the convenience of the tax. 
C)  The rate change is intended to affect social behavior. 
D)  Statements B. and C. are true.

Question 5

A static forecast of the incremental revenue from a tax rate increase presumes that:

Accepted Answer

A)  The tax base will not change because of the rate increase. 
B)  The tax base will increase by the same proportion as the rate increase. 
C)  The tax base will decrease by the same proportion as the rate increase. 
D)  The tax rate and the tax base are correlated. 
A)  The tax base will not change because of the rate increase. 
B)  The tax base will increase by the same proportion as the rate increase. 
C)  The tax base will decrease by the same proportion as the rate increase. 
D)  The tax rate and the tax base are correlated.

Question 6

Jurisdiction M imposes an individual income tax based on the following schedule.   Ms. Owen has $314,000 taxable income. Compute the tax on this income.

Accepted Answer

A)  $29,680 
B)  $28,180 
C)  $37,680 
D)  None of the above 
A)  $29,680 
B)  $28,180 
C)  $37,680 
D)  None of the above

Question 7

The state of California plans to amend its personal income tax laws to allow parents to reduce their tax by the cost of infant car seats. Which of the following statements is true?

Accepted Answer

A)  The amendment creates a tax preference for parents who purchase infant car seats. 
B)  The amendment is intended to change social behavior. 
C)  The amendment increases the neutrality of the tax law. 
D)  Statements A. and B. are true. 
A)  The amendment creates a tax preference for parents who purchase infant car seats. 
B)  The amendment is intended to change social behavior. 
C)  The amendment increases the neutrality of the tax law. 
D)  Statements A. and B. are true.

Question 8

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 9

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 10

The federal government is not required to pay interest on the national debt.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following statements about horizontal equity is false?

Accepted Answer

A)  Horizontal equity focuses on a rational and impartial measurement of the tax base. 
B)  Horizontal equity focuses on the measurement of taxpayers' ability to pay. 
C)  If persons with equal ability to pay a tax owe an equal amount of tax, the tax is horizontally equitable. 
D)  None of the above is false. 
A)  Horizontal equity focuses on a rational and impartial measurement of the tax base. 
B)  Horizontal equity focuses on the measurement of taxpayers' ability to pay. 
C)  If persons with equal ability to pay a tax owe an equal amount of tax, the tax is horizontally equitable. 
D)  None of the above is false.

Question 12

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 13

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

Question 14

Which of the following statements about tax rate structures is true?

Accepted Answer

A)  Regressive rate structures are illegal in the United States. 
B)  A tax with a graduated rate structure must be either regressive or progressive. 
C)  A proportionate rate structure is the only structure resulting in vertical equity. 
D)  None of the above is true. 
A)  Regressive rate structures are illegal in the United States. 
B)  A tax with a graduated rate structure must be either regressive or progressive. 
C)  A proportionate rate structure is the only structure resulting in vertical equity. 
D)  None of the above is true.

Question 15

Which of the following statements concerning tax preferences is false?

Accepted Answer

A)  Tax preferences increase the complexity of the law. 
B)  Tax preferences raise additional revenue for the government. 
C)  Tax preferences are government subsidies for targeted taxpayer activities. 
D)  Tax preferences do not improve the accurate measurement of the tax base. 
A)  Tax preferences increase the complexity of the law. 
B)  Tax preferences raise additional revenue for the government. 
C)  Tax preferences are government subsidies for targeted taxpayer activities. 
D)  Tax preferences do not improve the accurate measurement of the tax base.

Question 16

The country of Valhalla levies an income tax with the following rate structure.   A. Mrs. Greene's annual income is $125,000. Compute her tax, her average tax rate, and her marginal tax rate.
B. Mr. Chen's annual income is $220,000. Computer his tax, his average tax rate, and his marginal tax rate.
C. Does Valhalla have a proportionate, progressive, or regressive tax rate structure?

Accepted Answer

A. Mrs. Greene's tax is $10,000 = (5% *

Question 17

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. Which of the following statements is false?

Accepted Answer

A)  Country Z's tax system is sufficient. 
B)  Country Z's government is engaging in deficit spending. 
C)  If Country Z must borrow $4 million to pay for its public programs, its national debt will increase by $4 million. 
D)  Country Z's government could balance its budget by eliminating a program that costs $4 million. 
A)  Country Z's tax system is sufficient. 
B)  Country Z's government is engaging in deficit spending. 
C)  If Country Z must borrow $4 million to pay for its public programs, its national debt will increase by $4 million. 
D)  Country Z's government could balance its budget by eliminating a program that costs $4 million.

Question 18

The City of Willford levies a flat 7% tax on individual income in excess of $55,000. Individuals who earn $55,000 or less pay no income tax.
A. Ms. Vello earned $127,200 income this year. Compute her city income tax and determine her average tax rate.
B. Mr. Sui earned $68,900 income this year. Compute his city income tax and determine his average tax rate.
C. Does Willford have a proportionate, progressive, or regressive tax rate structure?

Accepted Answer

A. Ms. Vello's tax is $5,054 ($72,200 *

Question 19

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 above 
A)  $4,740 
B)  $6,240 
C)  $8,740 
D)  None of the above

Question 20

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

Accepted Answer

A)  An efficient tax encourages economic growth. 
B)  An efficient tax encourages full employment. 
C)  An efficient tax encourages price-level stability. 
D)  All of the above describe the Keynesian standard of tax efficiency. 
A)  An efficient tax encourages economic growth. 
B)  An efficient tax encourages full employment. 
C)  An efficient tax encourages price-level stability. 
D)  All of the above describe the Keynesian standard of tax efficiency.

A dynamic forecast of the incremental revenue from a tax rate increase presumes that:

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

The government of Nation C operated at a $32 billion deficit this year. The deficit suggests that Nation C's tax system is:

Government L levies a 4% excise tax on restaurant meals. It is considering reducing the rate to 2% on meals served in restaurants that ban cigarette and cigar smoking and to increase the rate to 5% in restaurants that allow smoking. Which of the following statements is true?

A static forecast of the incremental revenue from a tax rate increase presumes that:

Jurisdiction M imposes an individual income tax based on the following schedule. Ms. Owen has $314,000 taxable income. Compute the tax on this income.

The state of California plans to amend its personal income tax laws to allow parents to reduce their tax by the cost of infant car seats. Which of the following statements is true?

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

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

The federal government is not required to pay interest on the national debt.

Which of the following statements about horizontal equity is false?

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

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

Which of the following statements about tax rate structures is true?

Which of the following statements concerning tax preferences is false?

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. Which of the following statements is false?

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 does not describe the Keynesian standard of tax efficiency?

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

A dynamic forecast of the incremental revenue from a tax rate increase presumes that:

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

The government of Nation C operated at a $32 billion deficit this year. The deficit suggests that Nation C's tax system is:

Government L levies a 4% excise tax on restaurant meals. It is considering reducing the rate to 2% on meals served in restaurants that ban cigarette and cigar smoking and to increase the rate to 5% in restaurants that allow smoking. Which of the following statements is true?

A static forecast of the incremental revenue from a tax rate increase presumes that:

Jurisdiction M imposes an individual income tax based on the following schedule. Ms. Owen has $314,000 taxable income. Compute the tax on this income.

The state of California plans to amend its personal income tax laws to allow parents to reduce their tax by the cost of infant car seats. Which of the following statements is true?

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

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

The federal government is not required to pay interest on the national debt.

Which of the following statements about horizontal equity is false?

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

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

Which of the following statements about tax rate structures is true?

Which of the following statements concerning tax preferences is false?

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. Which of the following statements is false?

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 does not describe the Keynesian standard of tax efficiency?

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