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

Question 2

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

Question 3

Mr. Ohno owns and operates a part-time service business that generates $80,000 annual taxable income. His federal tax rate on this income is 17%. Because of recent legislation, this rate will increase to 25% next year.
A.Based on a static forecast, how much additional revenue will the federal government collect from Mr.Ohno next year?
A.The federal government will collect $6,400 additional revenue ($80,000 * 8% rate increase).
B.How much additional revenue will the federal government collect if Mr.Ohno decides to work fewer hours and consequently earns only $50,000 next year?
B.The federal government will collect $1,100 less revenue ([$50,000 * 25%] - [$80,000 * 17%]).

Accepted Answer

The answer of Mr. Ohno owns and operates a part-time...

Question 4

Which of the following statements concerning the standard of fairness is false?

Accepted Answer

A) People who believe that a tax is unfair are more likely to evade the tax. 
B) People believe that the federal income tax is unfair because it contains preferences available only to wealthy individuals. 
C) The public perception that the federal income tax is unfair has decreased in recent decades. 
D) None of the above is false.

Question 5

Tax systems with regressive rate structures result in a proportionally heavier tax burden on persons with smaller tax bases.

Accepted Answer

A) True 
 B)False

Question 6

Vervet County levies a real property tax based on the following schedule.  Bilex Inc. owns real property valued at $629,800. Compute Bilex's tax on this property.

Accepted Answer

A) $13,798 
B) $7,500 
C) $6,298 
D) None of the above

Question 7

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.

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

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.

Question 10

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 11

Supply-side economic theory

Accepted Answer

A) Predicts that a decrease in the highest income tax rates will cause an increase in government revenues. 
B) Is inconsistent with the substitution effect. 
C) Was a clear failure following the Reagan administration tax cuts of the 1980s. 
D) Predicts that taxpayers will save their tax windfall from a rate cut rather than spend or investment the windfall.

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

The Internal Revenue Service's cost of collecting $100 of tax revenue is about $3.

Accepted Answer

A) True 
 B)False

Question 14

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.

Question 15

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.

Question 16

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

Accepted Answer

A) A regressive rate structure cannot result in vertical equity. 
B) Regressive rates decrease as the tax base increases. 
C) A regressive rate structure places a proportionally heavier tax burden on taxpayers with smaller tax bases than persons with greater tax bases. 
D) None of the above is false.

Question 17

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.

Question 18

Which of the following statements concerning tax preferences is true?

Accepted Answer

A) The annual revenue loss from federal tax preferences is quantified in the Tax Expenditures Budget. 
B) Tax preferences increase the fairness of the tax law. 
C) Tax preferences simplify the tax law. 
D) Tax preferences make the tax law more neutral across taxpayers.

Question 19

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

The answer of The country of Valhalla levies an income...

Question 20

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.

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?

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

Which of the following statements concerning the standard of fairness is false?

Tax systems with regressive rate structures result in a proportionally heavier tax burden on persons with smaller tax bases.

Vervet County levies a real property tax based on the following schedule. Bilex Inc. owns real property valued at $629,800. Compute Bilex's tax on this property.

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

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

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

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

Supply-side economic theory

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

The Internal Revenue Service's cost of collecting $100 of tax revenue is about $3.

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?

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

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

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?

Which of the following statements concerning tax preferences is true?

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