Deck 17: Taxes on Wealth, Property, and Estates 

Question 1

Wealth taxes are a relatively new form of taxation.

Answer 1

False

Question 2

Wealth is:

A)a flow.
B)a stock.
C)the market value of accumulated assets.
D)both (b) and (c) are correct.

Answer 2

both (b) and (c) are correct.

Question 3

The local property tax in the United States will reduce the return to real estate only in the long run.

Answer 3

False

Question 4

Total wealth definitions never include intangible personal property.

Question 5

Assuming that the supply curve of savings is upward sloping, a comprehensive wealth tax will reduce annual investment.

Question 6

As administered in the United States, the local property tax is mainly a tax on real estate.

Question 7

Other things being equal, if the property tax rate is above the national average for a jurisdiction, capital can be expected to flow out of the region in that area.

Question 8

If the supply of savings is perfectly inelastic, a comprehensive wealth tax will increase the market rate of interest.

Question 9

A comprehensive wealth tax base includes:

A)all real tangible, intangible, and human wealth, less any claims against those assets.
B)only real property.
C)only intangible assets.
D)only tangible assets.

Question 10

A general tax on wealth will cause efficiency loss in labor markets.

Question 11

A wealth tax is equivalent to a tax on the return on savings.

Question 12

The town of Oz has raised its property tax rates considerably above the national average.Other things being equal, capital is likely to flow into Oz in the long run because of the tax.

Question 13

A person who never saves any income and receives no gifts and inheritances will never accumulate wealth.

Question 14

The property tax in the United States is likely to reduce the equilibrium return to investment.

Question 15

The local property tax is likely to result in less than the efficient amount of investment in real estate.

Question 16

The local property tax, as administered in the United States, is a general tax on wealth.

Question 17

A tax on the value of land is likely to be fully capitalized.

Question 18

If a real estate tax causes rents to rise, it cannot be fully capitalized.

Question 19

Wealth is a flow.

Question 20

If a local property tax increase is fully capitalized, property owners at the time of the increase cannot shift any of the current or future tax increase to buyers if they sell the property.

Question 21

If the supply of real estate is not perfectly inelastic, then the local real estate property tax differentials:

A)cannot be shifted to tenants.
B)can be shifted to tenants through increases in rents.
C)will be fully capitalized.
D)both (a) and (c) are correct.

Question 22

Intangible personal property includes:

A)stock in companies.
B)corporate bonds.
C)cash.
D)all of these are correct.

Question 23

If the annual amount of savings is $10 billion, what is the effect of a wealth tax assuming supply is perfectly inelastic?

A)Annual savings remain at $10 billion.
B)Annual savings increase above $10 billion.
C)Annual savings fall below $10 billion.
D)No particular effect is guaranteed to happen.

Question 24

If the interest elasticity of supply of savings is zero, a comprehensive wealth tax will:

A)increase the market rate of interest.
B)reduce the income of savers.
C)reduce the income of workers.
D)both (b) and (c) are correct.

Question 25

Taxes on wealth are favored by those who want to increase the taxes paid by the rich.Is the incidence of a comprehensive wealth tax likely to be progressive? Is the property tax, as used in the United States, a comprehensive wealth tax? Evaluate the incidence and effects on efficiency of the property tax in the United States.Why do some critics of the tax argue that it is regressive? Do you agree with their arguments?

Question 26

A local property tax, such as that used in the United States, is likely to:

A)increase investment in the economy.
B)cause a flow of investment among jurisdictions.
C)decrease the return to saving in all uses.
D)both (b) and (c) are correct.

Question 27

From the point of view of locality, increasing property taxes:

A)increases the price of locally produced goods.
B)decreases income of owners of land in the associated community.
C)does not affect buyers of locally produced goods fro outside of the community.
D)both (a) and (b) are correct.

Question 28

If a tax on real estate results in a decrease in the supply of housing, the tax will be:

A)fully capitalized.
B)only partially capitalized.
C)not capitalized at all.
D)borne entirely by renters.

Question 29

Which of the following would not be included in a comprehensive wealth tax base?

A)real estate
B)personal property
C)intangible assets
D)residential rents

Question 30

If the annual amount of savings is $10 billion, what is the effect of a wealth tax assuming supply is responsive?

A)Annual savings remain at $10 billion.
B)Annual savings increase above $10 billion.
C)Annual savings fall below $10 billion.
D)No particular effect is guaranteed to happen.

Question 31

Suppose that the current market rate of interest is 10 percent.The market rent on a parcel of land is $6,000 per year.A 10-percent land tax is imposed.As a result of the tax, the price of the land parcel:

A)falls from $60,000 to $30,000.
B)increases from $30,000 to $60,000.
C)falls 10 percent.
D)falls 20 percent.

Question 32

What is tax capitalization? Explain why a comprehensive wealth tax would not be capitalized.

Question 33

If the supply of saving is not perfectly inelastic, then substituting a value-added tax for an equal-yield general wealth tax will:

A)decrease market equilibrium interest rates.
B)increase the efficiency loss in labor markets.
C)decrease the efficiency loss in labor markets.
D)both (a) and (b) are correct.

Question 34

Assuming that investors seek to maximize the return on their investment, the long-run effect of a national tax on real estate will be to:

A)reduce the return to investment in real estate only.
B)reduce the return to investment in all assets.
C)reduce wages only.
D)increase the return to all investors.

Question 35

If a property tax on real estate is capitalized,

A)the price of real estate will rise.
B)the price of real estate will fall.
C)the price of real estate will be unaffected.
D)the burden of the tax will be transferred to buyers of real estate.

Question 36

The local property tax in the United States is levied primarily on:

A)personal property.
B)intangible property.
C)business property.
D)real estate.

Question 37

Tax capitalization is:

A)a decrease in the value of a taxed asset at a level related to the discounted value of the future tax liability.
B)partially recognized when the supply of a taxed asset is perfectly inelastic.
C)only partially recognized on assets like land.
D)both (b) and (c) are correct.

Question 38

If the supply curve of savings is upward sloping, a comprehensive wealth tax will:

A)increase the market rate of interest.
B)reduce the market rate of interest.
C)have zero excess burden.
D)have no effect on investment.

Question 39

If the supply of saving is not perfectly inelastic in the nation, then which of the following taxes will cause efficiency loss in capital markets?

A)A general wealth tax
B)A national tax on real estate
C)A consumption tax
D)Both (a) and (b) are correct.

Question 40

A comprehensive wealth tax will:

A)impair efficiency in labor markets.
B)impair efficiency in investment markets.
C)have no excess burden.
D)both (a) and (b) are correct.