Question 1

Marc, a single taxpayer, earns $60,000 in taxable income and $5,000 in interest from an investment in city of Birmingham Bonds. Using the U.S. tax rate schedule for year 2014, what is his effective tax rate (rounded)?

Accepted Answer

A)  23.08% 
B)  16.70% 
C)  14.48% 
D)  25.00% 
E)  None of these

Question 2

Which of the following is not one of the basic tax rate structures?

Accepted Answer

A)  Proportional 
B)  Equitable 
C)  Regressive 
D)  Progressive 
E)  All of these are different kinds of the basic tax rate structures

Question 3

Jonah, a single taxpayer, earns $150,000 in taxable income and $10,000 in interest from an investment in city of Denver Bonds. Using the U.S. tax rate schedule for year 2014, how much federal tax will he owe? What is his average tax rate? What is his effective tax rate? What is his current marginal tax rate? If Jonah earned an additional $40,000 of taxable income, what is his marginal tax rate on this income? (Round the tax rates to 2 decimal places, e.g., .12345 as 12.35%)

Accepted Answer

The answer of Jonah, a single taxpayer, earns $150,000 in...

Question 4

Which of the following statements is true?

Accepted Answer

A)  Municipal bond interest is subject to explicit federal tax 
B)  Municipal bond interest is subject to implicit tax 
C)  Municipal bonds typically pay a higher interest rate than corporate bonds with similar risk 
D)  All of these are true 
E)  None of these is true

Question 5

Implicit taxes are indirect taxes on tax-favored assets.

Accepted Answer

A) True 
 B)False

Question 6

Fred and Wilma, married taxpayers, earn $100,000 in taxable income and $20,000 in interest from an investment in city of Bedrock Bonds. Using the U.S. tax rate schedule for married filing jointly for year 2014, how much federal tax will they owe? What is their average tax rate? What is their effective tax rate? What is their current marginal tax rate? If Fred and Wilma earn an additional $40,000 of taxable income, what is their marginal tax rate on this income? (Round the tax rates to 2 decimal places, e.g., .12345 as 12.35%)

Accepted Answer

The answer of Fred and Wilma, married taxpayers, earn $100,000...

Question 7

Which of the following is false?

Accepted Answer

A)  A proportional tax rate structure imposes a constant tax rate while a progressive tax rate structure imposes an increasing marginal rate related to the tax base 
B)  The average tax rate changes under a proportional tax rate structure, but it is static for a progressive tax rate system 
C)  An example of a proportional tax is the tax on gasoline 
D)  An example of a progressive tax is the federal tax on gifts 
E)  None of these

Question 8

How much money would Leonardo and Theresa save if they filed jointly instead of separately for year 2014?

Accepted Answer

A)  Nothing 
B)  $167.50 
C)  $309.75 
D)  $5,907.00 
E)  None of these

Question 9

Congress would like to increase tax revenues by 20 percent. Assume that the average taxpayer in the United States earns $80,000 and pays an average tax rate of 17.5%. If the income effect is larger than the substitution effect, what average tax rate will result in a 20 percent increase in tax revenues? This is an example of what type of forecasting?

Accepted Answer

The answer of Congress would like to increase tax revenues...

Question 10

Namratha has the choice between investing in a city of Watkinsville bond at 4.5% or a Moe's, Inc. bond at 7%. Assuming that both bonds have the same non-tax characteristics and that Namratha has a 25% marginal tax rate, in which bond should she invest? What interest rate offered by Moe's, Inc. would make Namratha indifferent between investing in the two bonds?

Accepted Answer

The answer of Namratha has the choice between investing in...

Question 11

Common examples of sin taxes include the taxes imposed on airline tickets and gasoline.

Accepted Answer

A) True 
 B)False

Question 12

Dynamic forecasting does not take into consideration taxpayers' responses to a tax change when estimating tax revenues.

Accepted Answer

A) True 
 B)False

Question 13

A use tax is typically imposed by a state on goods purchased within the state.

Accepted Answer

A) True 
 B)False

Question 14

Employers often withhold federal income taxes directly from worker's paychecks. This is an example of which principle in practice?

Accepted Answer

A)  Convenience 
B)  Certainty 
C)  Economy 
D)  Equity 
E)  None of these

Question 15

Taxes influence which of the following decisions?

Accepted Answer

A)  business decisions 
B)  personal decisions 
C)  political decisions 
D)  investment decisions 
E)  All of these

Question 16

The income and substitution effects are two opposing effects that one could consider in static forecasting.

Accepted Answer

A) True 
 B)False

Question 17

A 1% charge imposed by a local government on football tickets sold is not considered a tax if all proceeds are earmarked to fund local schools.

Accepted Answer

A) True 
 B)False

Question 18

Taxes influence business decisions such as where a business should locate or how a business should be structured.

Accepted Answer

A) True 
 B)False

Question 19

Margaret was issued a $150 speeding ticket. This is:

Accepted Answer

A)  A tax because payment is required by law 
B)  A tax because the payment is not related to any specific benefit received from the government agency collecting the ticket 
C)  Not a tax because it is considered a fine intended to punish illegal behavior 
D)  A tax because it is imposed by a government agency 
E)  Not a tax because Margaret could have avoided payment if she did not speed

Question 20

Which of the following is true regarding real property taxes and personal property taxes?

Accepted Answer

A)  Personal property taxes are assessed on permanent structures and land 
B)  Real property taxes are assessed on cars and boats 
C)  All U.S. states currently impose personal property taxes 
D)  Real property taxes are generally easier to administer than personal property taxes 
E)  None of these is true

Exam 1: An Introduction to Tax

Marc, a single taxpayer, earns $60,000 in taxable income and $5,000 in interest from an investment in city of Birmingham Bonds. Using the U.S. tax rate schedule for year 2014, what is his effective tax rate (rounded) ?

Which of the following is not one of the basic tax rate structures?

Which of the following statements is true?

Implicit taxes are indirect taxes on tax-favored assets.

Which of the following is false?

How much money would Leonardo and Theresa save if they filed jointly instead of separately for year 2014?

Common examples of sin taxes include the taxes imposed on airline tickets and gasoline.

Dynamic forecasting does not take into consideration taxpayers' responses to a tax change when estimating tax revenues.

A use tax is typically imposed by a state on goods purchased within the state.

Employers often withhold federal income taxes directly from worker's paychecks. This is an example of which principle in practice?

Taxes influence which of the following decisions?

The income and substitution effects are two opposing effects that one could consider in static forecasting.

A 1% charge imposed by a local government on football tickets sold is not considered a tax if all proceeds are earmarked to fund local schools.

Taxes influence business decisions such as where a business should locate or how a business should be structured.

Margaret was issued a $150 speeding ticket. This is:

Which of the following is true regarding real property taxes and personal property taxes?