Question 1

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 2

In terms of effective tax rates, the sales tax can be viewed as a regressive tax.

Accepted Answer

A) True 
 B)False

Question 3

The difficulty in calculating a tax is typically in the determination of:

Accepted Answer

A) The correct tax rate 
B) Where to file the tax return 
C) The tax base 
D) The due date for the return 
E) None of these

Question 4

One benefit of a sin tax (e.g., a tax on cigarettes) is that it should increase the demand for the products being taxed.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is a tax?
I. A 1% special sales tax for funding local road construction.
II. A fee paid to the state for a license to practice as an attorney.
III. An income tax imposed by Philadelphia on persons working within the city limits.
IV. A special property assessment for installing a new water system in the taxpayer's neighborhood.

Accepted Answer

A) Only I is correct. 
B) Only IV is correct. 
C) Only III is correct. 
D) III and IV are correct. 
E) I and III are correct.

Question 6

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, how much federal tax will he owe?

Accepted Answer

A) $15,000.00 
B) $12,021.25 
C) $10,771.25 
D) $8,072.50 
E) None of these

Question 7

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 8

In considering the "economy" criterion in evaluating tax systems, one must consider this criterion from both the taxpayer and the government's perspective.

Accepted Answer

A) True 
 B)False

Question 9

Regressive tax rate structures are typically considered to be vertically equitable.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

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 12

The tax base for the federal income tax is taxable income.

Accepted Answer

A) True 
 B)False

Question 13

Nelson has the choice between investing in a city of Fruithurst bond at 4% or a J.B. Ribs, Inc. bond at 6.5%. Assuming that both bonds have the same non-tax characteristics and that Nelson has a 40% marginal tax rate, in which bond should he invest? What interest rate offered by J.B. Ribs, Inc. would make Nelson indifferent between investing in the two bonds?

Accepted Answer

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

Question 14

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 15

Leonardo, who is married but files separately, earns $80,000 of taxable income. He also has $15,000 in city of Tulsa bonds. His wife, Theresa, earns $50,000 of taxable income.
If Leonardo earned an additional $30,000 of taxable income this year, what would be the marginal tax rate (rounded) on the extra income for year 2016?

Accepted Answer

A) 27.75% 
B) 17.50% 
C) 25.00% 
D) 28.00% 
E) None of these

Question 16

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 17

The largest federal tax, in terms of revenue collected, is the social security tax.

Accepted Answer

A) True 
 B)False

Question 18

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 19

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 20

Property taxes may be imposed on both real and personal property.

Accepted Answer

A) True 
 B)False

Exam 1: An Introduction to Tax

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

In terms of effective tax rates, the sales tax can be viewed as a regressive tax.

The difficulty in calculating a tax is typically in the determination of:

One benefit of a sin tax (e.g., a tax on cigarettes) is that it should increase the demand for the products being taxed.

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, how much federal tax will he owe?

In considering the "economy" criterion in evaluating tax systems, one must consider this criterion from both the taxpayer and the government's perspective.

Regressive tax rate structures are typically considered to be vertically equitable.

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

The tax base for the federal income tax is taxable income.

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

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

The largest federal tax, in terms of revenue collected, is the social security tax.

Taxes influence which of the following decisions?

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

Property taxes may be imposed on both real and personal property.