Question 1

Al believes that SUVs have negative social and environmental effects because of their increased carbon monoxide emissions. He proposes eliminating sales taxes on smaller automobiles in favor of higher sales taxes levied on SUVs. Al performs some calculations and comes to the conclusion that based on the current number of SUVs owned in the U.S. exactly the same amount of total sales tax will be collected under his reformed system. Which of the following concepts explains why Al's idea may not work?

Accepted Answer

A)  The ability to pay principle 
B)  Horizontal equity 
C)  Substitution effect 
D)  Vertical equity 
E)  None of these

Question 2

Which of the following represents the largest percentage of average state tax revenue?

Accepted Answer

A)  Sales tax 
B)  Individual income tax 
C)  Other 
D)  Property tax 
E)  None of these

Question 3

Heather, a single taxpayer who files as a head of household, earns $60,000 in taxable income and $5,000 in interest from an investment in city of Oxford Bonds. Using the U.S. tax rate schedule for year 2016, how much federal tax will she owe? What is her average tax rate? What is her effective tax rate? What is her current marginal tax rate? If Heather has an additional $20,000 of tax deductions, what is her marginal tax rate on these deductions? (Round the tax rates to 2 decimal places, e.g., .12345 as 12.35%)

Accepted Answer

The answer of Heather, a single taxpayer who files as...

Question 4

Evaluate the U.S. federal tax system on the certainty and economy criteria.

Accepted Answer

The answer of Evaluate the U.S. federal tax system on...

Question 5

George recently paid $50 to renew his driver's license. The $50 payment is considered a tax.

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 2016, 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

A flat tax is an example of a graduated tax system.

Accepted Answer

A) True 
 B)False

Question 8

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 2016, what is his effective tax rate (rounded)?

Accepted Answer

A)  18.49% 
B)  16.57% 
C)  12.41% 
D)  25.00% 
E)  None of these

Question 9

Which of the following is not an example of a graduated tax rate structure?

Accepted Answer

A)  Progressive tax rate structure 
B)  Proportional tax rate structure 
C)  U.S. Federal Income Tax 
D)  Regressive tax rate structure 
E)  None of these

Question 10

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 2016, what is his current marginal tax rate?

Accepted Answer

A)  15.00% 
B)  25.00% 
C)  28.00% 
D)  33.00% 
E)  None of these

Question 11

Earmarked taxes are:

Accepted Answer

A)  Taxes assessed only on certain taxpayers 
B)  Taxes assessed to fund a specific purpose 
C)  Taxes assessed for only a specific time period 
D)  Taxes assessed to discourage less desirable behavior 
E)  None of these

Question 12

Manny, a single taxpayer, earns $65,000 per year in taxable income and an additional $12,000 per year in city of Boston bonds. If Manny earns an additional $35,000 in taxable income in year 2016, what is his marginal tax rate (rounded) on this income?

Accepted Answer

A)  22.06% 
B)  28.00% 
C)  25.76% 
D)  25.00% 
E)  None of these

Question 13

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 14

Which of the following is true regarding use taxes?

Accepted Answer

A)  A use tax is relatively easy to enforce compared to a sales tax. 
B)  Use taxes attempt to eliminate any tax advantage of purchasing goods out of state. 
C)  Use taxes encourage taxpayers to buy goods out of state to avoid paying sales tax in their home state. 
D)  A use tax is generally a progressive tax. 
E)  None of these is true.

Question 15

Consider the following tax rate structure. Is it horizontally equitable? Why or why not? Is it vertically equitable? Why or why not? $$\begin{array} { l | r | r | r } 
\text { Taxpayer } & \text { Salary } & \text { Mun-Bond Interest } & \text { Total Tax } \
\hline \text { Diego } & 30,000 & 10,000 & 1,500 \
\text { Dora } & 50,000 & 5,000 & ? ? ? \
\hline
\end{array}$$

Accepted Answer

The answer of Consider the following tax rate structure. Is...

Question 16

The state of Georgia recently increased its tax on a carton of cigarettes by $2.00. What type of tax is this?

Accepted Answer

A)  A sin tax 
B)  An excise tax 
C)  It is not a tax; it is a fine 
D)  A sin tax and An excise tax are correct 
E)  None of these is correct

Question 17

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 18

In a proportional (flat) tax rate system, the marginal tax rate will always equal the average tax rate.

Accepted Answer

A) True 
 B)False

Question 19

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 2016, 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 20

Excise taxes are typically levied on the value of a good purchased.

Accepted Answer

A) True 
 B)False

Exam 1: An Introduction to Tax

Which of the following represents the largest percentage of average state tax revenue?

Evaluate the U.S. federal tax system on the certainty and economy criteria.

George recently paid $50 to renew his driver's license. The $50 payment is considered a tax.

A flat tax is an example of a graduated tax system.

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 2016, what is his effective tax rate (rounded) ?

Which of the following is not an example of a graduated tax rate structure?

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 2016, what is his current marginal tax rate?

Earmarked taxes are:

Manny, a single taxpayer, earns $65,000 per year in taxable income and an additional $12,000 per year in city of Boston bonds. If Manny earns an additional $35,000 in taxable income in year 2016, what is his marginal tax rate (rounded) on this income?

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

Which of the following is true regarding use taxes?

The state of Georgia recently increased its tax on a carton of cigarettes by $2.00. What type of tax is this?

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

In a proportional (flat) tax rate system, the marginal tax rate will always equal the average tax rate.

Excise taxes are typically levied on the value of a good purchased.