Question 1

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 2

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 3

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

Question 4

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 5

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.

Question 6

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 7

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 8

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 9

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

Accepted Answer

A) True 
 B)False

Question 10

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 11

Congress plans to amend the federal income tax to provide a deduction for the cost of energy-efficient fluorescent light bulbs. 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 12

According to the Keynesian 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

Question 13

Which of the following statements concerning the federal Social Security tax is true?

Accepted Answer

A)  The tax burden increases annually because the rate increases annually. 
B)  The tax burden increases annually because the base increases annually. 
C)  Both the rate and the base increase annually. 
D)  The Social Security tax burden has not increased since 1990. 
A)  The tax burden increases annually because the rate increases annually. 
B)  The tax burden increases annually because the base increases annually. 
C)  Both the rate and the base increase annually. 
D)  The Social Security tax burden has not increased since 1990.

Question 14

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 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

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

Accepted Answer

A) True 
 B)False

Question 17

The federal Social Security tax burden on employees has not increased since 1990 because the tax rate has not increased since that year.

Accepted Answer

A) True 
 B)False

Question 18

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 19

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

Accepted Answer

A)  If Ms. Lui's taxable income is $33,400, her average tax rate is 5%. 
B)  If Mr. Bell's taxable income is $519,900, his marginal tax rate is 12%. 
C)  If Ms. Vern's taxable income is $188,000, her average tax rate is 7.2%. 
D)  None of the above is false. 
A)  If Ms. Lui's taxable income is $33,400, her average tax rate is 5%. 
B)  If Mr. Bell's taxable income is $519,900, his marginal tax rate is 12%. 
C)  If Ms. Vern's taxable income is $188,000, her average tax rate is 7.2%. 
D)  None of the above is false.

Question 20

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. Compute 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% ×

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

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

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

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?

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?

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.

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

Which of the following statements about horizontal equity is false?

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

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

Congress plans to amend the federal income tax to provide a deduction for the cost of energy-efficient fluorescent light bulbs. Which of the following statements is true?

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

Which of the following statements concerning the federal Social Security tax is true?

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

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

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

The federal Social Security tax burden on employees has not increased since 1990 because the tax rate has not increased since that year.

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

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

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

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

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

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?

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?

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.

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

Which of the following statements about horizontal equity is false?

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

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

Congress plans to amend the federal income tax to provide a deduction for the cost of energy-efficient fluorescent light bulbs. Which of the following statements is true?

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

Which of the following statements concerning the federal Social Security tax is true?

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

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

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

The federal Social Security tax burden on employees has not increased since 1990 because the tax rate has not increased since that year.

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

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