Question 1

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 2

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 3

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

Accepted Answer

A) True 
 B)False

Question 4

If State H increases its sales tax rate by 1%, its sales tax revenue must also increase by 1%.

Accepted Answer

A) True 
 B)False

Question 5

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 6

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 7

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 8

Which of the following statements about the substitution effect of an income tax rate increase is false?

Accepted Answer

A)  The substitution effect is theoretically stronger for high-income taxpayers than for low-income taxpayers. 
B)  The substitution effect is theoretically stronger for a family's secondary wage earner than for the family's primary wage earner. 
C)  The substitution effect is theoretically stronger for self-employed individuals who control their own time than for employees whose work schedules are controlled by their employers. 
D)  None of the above is false. 
A)  The substitution effect is theoretically stronger for high-income taxpayers than for low-income taxpayers. 
B)  The substitution effect is theoretically stronger for a family's secondary wage earner than for the family's primary wage earner. 
C)  The substitution effect is theoretically stronger for self-employed individuals who control their own time than for employees whose work schedules are controlled by their employers. 
D)  None of the above is false.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

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 11

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.

Question 12

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 13

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 14

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 15

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 16

According to the classical 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 17

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 18

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)  Both the amendment creates a tax preference for parents who purchase infant car seats and is also intended to change social behavior 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)  Both the amendment creates a tax preference for parents who purchase infant car seats and is also intended to change social behavior are true.

Question 19

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 20

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.

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

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?

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

If State H increases its sales tax rate by 1%, its sales tax revenue must also increase by 1%.

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?

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

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

Which of the following statements about the substitution effect of an income tax rate increase is false?

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

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

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

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

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

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

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?

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

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

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?

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

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

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

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

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?

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

If State H increases its sales tax rate by 1%, its sales tax revenue must also increase by 1%.

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?

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

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

Which of the following statements about the substitution effect of an income tax rate increase is false?

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

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

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

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

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

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

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?

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

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

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?

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

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

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