Exam 1: An Introduction to Tax

The effective tax rate,in general,provides a better depiction of a taxpayer's tax burden than the average tax rate.

Consider the following tax rate structure.Is it horizontally equitable? Why or why not? Is it vertically equitable? Why or why not?

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

Jed Clampett is expanding his family-run beer distributorship into Georgia or Tennessee.His parents began the business many years ago and now three generations of Clampetts work in the family business.Jed will relocate the entire family (his parents,spouse,children,etc.)to either state after the move.What types of taxes may influence his decision of where to locate his business? What nontax factors may influence the decision?

A common example of an employment-related tax is the Medicare tax.

The ultimate economic burden of a tax is best captured by:

Margaret recently received a parking ticket.This is a common example of a local tax.

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. How much money would Leonardo and Theresa save if they file jointly instead of separately for 2019? (Use tax rate schedule.)

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

Mandy,the mayor of Bogart and a strong advocate of a clean downtown,is proposing an increase in the city sales tax from 7 percent to 50 percent on all packs of chewing gum purchased in Bogart.Based on the current gum sales,Mandy estimates that this tax will actually reduce the tax revenue on gum sales.What type of forecasting is Mandy using to derive her tax revenue estimates? What "effect" is her estimate based on? Does this necessarily imply that Mandy will be happy given her desire to have a clean downtown?

The largest federal tax,in terms of revenue collected,is the Social Security tax.

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

The effective tax rate expresses the taxpayer's total tax as a percentage of the taxpayer's taxable and nontaxable income.

A sales tax is a common example of a progressive tax rate structure.

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

Curtis invests $250,000 in a city of Athens bond that pays 7 percent interest.Alternatively,Curtis could have invested the $250,000 in a bond recently issued by Initech,Inc.that pays 9 percent interest with similar risk as the city of Athens bond.Assume that Curtis's marginal tax rate is 24 percent. What is Curtis's after-tax rate of return on the city of Athens bond?

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

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

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 and his wife file married filing jointly in 2019,What is Leonardo and Theresa's effective tax rate for 2019 (rounded)? (Use tax rate schedule.)

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 2019,what is his average tax rate (rounded)? (Round your final answer to the nearest whole percent.)(Use tax rate schedule.)