Question 1

Congress originally enacted the federal estate and gift taxes to improve: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

Question 2

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

Accepted Answer

A) An efficient tax is a neutral factor in a free market economy. 
B) An efficient tax does not change taxpayer behavior. 
C) An efficient tax encourages full employment. 
D) An efficient tax favors a laissez-faire economy policy. 
A) An efficient tax is a neutral factor in a free market economy. 
B) An efficient tax does not change taxpayer behavior. 
C) An efficient tax encourages full employment. 
D) An efficient tax favors a laissez-faire economy policy. C

Question 3

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 B

Question 4

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 5

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 6

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

Accepted Answer

A) True 
 B)False

Question 7

The federal income tax law allows individuals whose property is destroyed by a natural disaster such as a fire or hurricane to reduce their taxable income by the amount of their financial loss. This rule is intended to improve the:

Accepted Answer

A) Convenience of the tax 
B) Efficiency of the tax 
C) Horizontal equity of the tax 
D) Vertical equity of the tax 
A) Convenience of the tax 
B) Efficiency of the tax 
C) Horizontal equity of the tax 
D) Vertical equity of the tax

Question 8

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 9

Congress recently amended the tax law to make it easier for individuals to file their income tax returns electronically (online). 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.

Question 10

The city of Berne recently enacted a 10% tax on the price of a subway ticket. Consequently, Mrs. Lane now walks to work instead of taking the subway. Her behavior illustrates the substitution effect of a tax increase.

Accepted Answer

A) True 
 B)False

Question 11

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 12

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 13

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 14

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 15

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 16

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 17

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 18

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 A.and B.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 A.and B.are true.

Question 19

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 20

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

Accepted Answer

A) True 
 B)False

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

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

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.

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

Which of the following statements about vertical equity is false?

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

The federal income tax law allows individuals whose property is destroyed by a natural disaster such as a fire or hurricane to reduce their taxable income by the amount of their financial loss. This rule is intended to improve the:

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

Congress recently amended the tax law to make it easier for individuals to file their income tax returns electronically (online). Which of the following statements is true?

The city of Berne recently enacted a 10% tax on the price of a subway ticket. Consequently, Mrs. Lane now walks to work instead of taking the subway. Her behavior illustrates the substitution effect of a tax increase.

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

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

Which of the following statements about horizontal equity is false?

Which of the following statements concerning tax preferences is false?

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:

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?

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.

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

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?

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

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 a Present Value of $1 B Present Value of Annuity of $1 C 2013 Income Tax Rates

Filters

Exam 2: Policy Standards for a Good Tax

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

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

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.

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

Which of the following statements about vertical equity is false?

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

The federal income tax law allows individuals whose property is destroyed by a natural disaster such as a fire or hurricane to reduce their taxable income by the amount of their financial loss. This rule is intended to improve the:

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

Congress recently amended the tax law to make it easier for individuals to file their income tax returns electronically (online). Which of the following statements is true?

The city of Berne recently enacted a 10% tax on the price of a subway ticket. Consequently, Mrs. Lane now walks to work instead of taking the subway. Her behavior illustrates the substitution effect of a tax increase.

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

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

Which of the following statements about horizontal equity is false?

Which of the following statements concerning tax preferences is false?

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:

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?

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.

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

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?

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

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 a Present Value of $1 B Present Value of Annuity of $1 C 2013 Income Tax Rates

Filters