Exam 1: An Introduction to Tax

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

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 2017, what is his current marginal tax rate? (Use tax rate schedule.)

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

Congress recently approved a new, smaller budget for the IRS. What taxation concept evaluates the cost of administering our tax law?

Sin taxes are:

Which of the following is true regarding use taxes?

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 somecalculations 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?

Earmarked taxes are:

To be indifferent between investing in the two bonds, the Moe's, Inc. bond should provide Namratha t same after-tax rate of return as the city of Watkinsville bond (4.5%). To solve for the required pre-tax rate of return we can use the following formula: After-tax return = Pre-tax return × (1 - Marginal Tax Rate). Moe's, Inc. needs to offer a 6% interest rate to generate a 4.5% after-tax return and make Namratha indifferent between investing in the two bonds. 4.5% = Pre-tax return × (1 - 25%); Pre-tax return = 4.5%/(1 - 25%) = 6% -Given the following tax structure, what is the minimum tax that would need to be assessed on Lizzy to make the tax progressive with respect to average tax rates? What is the minimum tax that would need to beassessed on Lizzy to make the tax progressive with respect to effective tax rates? Taxpayer Salary Muni-Bond Interest Total TaxMort 20,000 5,000 4,000Lizzy 80,000 30,000 ???

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 2017, 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%) (Use tax rate schedule.)

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

A use tax is typically imposed by a state on goods purchased within the state.

Although the primary purpose of a tax system is to raise revenue, Congress uses the federal tax system for other purposes as well. Describe the other ways in which Congress uses the federal tax system. Be specific.

Curtis invests $250,000 in a city of Athens bond that pays 7% interest. Alternatively, Curtis 8c6o)uld have invested the $250,000 in a bond recently issued by Initech, Inc. that pays 9% interest with similar risk as the city of Athens bond. Assume that Curtis' marginal tax rate is 28%.How much explicit tax would Curtis incur on interest earned on the Initech, Inc. bond?

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

While sales taxes are quite common, currently the U.S. federal government does not impose a sales tax.

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

The income and substitution effects are two opposing effects that one could consider in static forecasting.

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.

Self-employment taxes are charged on self-employment income in addition to any federal income tax.