Question 1

A provision in the tax law designed to encourage a specific economic behavior is a tax preference.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following statements concerning income tax rate structures is false?

Accepted Answer

A)  Under a progressive rate structure, the marginal rate and the average rate are equal. 
B)  Under a regressive rate structure, the average rate for low-income individuals is more than the average rate for high-income individuals. 
C)  Under either a regressive, proportionate, or progressive rate structure, high-income taxpayers pay more dollars of tax than low-income individuals. 
D)  In theory, a progressive rate structure results in equal economic sacrifice across taxpayers. 
A)  Under a progressive rate structure, the marginal rate and the average rate are equal. 
B)  Under a regressive rate structure, the average rate for low-income individuals is more than the average rate for high-income individuals. 
C)  Under either a regressive, proportionate, or progressive rate structure, high-income taxpayers pay more dollars of tax than low-income individuals. 
D)  In theory, a progressive rate structure results in equal economic sacrifice across taxpayers.

Question 3

Tax systems with regressive rate structures result in a proportionally heavier tax burden on persons with smaller tax bases.

Accepted Answer

A) True 
 B)False

Question 4

A progressive rate structure and a proportionate rate structure both result in vertical equity across taxpayers.

Accepted Answer

A) True 
 B)False

Question 5

According to the Keynesian concept of efficiency, an efficient tax should be neutral in its effect on free market allocations of economic resources.

Accepted Answer

A) True 
 B)False

Question 6

Jurisdiction M imposes an individual income tax based on the following schedule. $\begin{array}{rr}\text { Rate }&\text { Income bracket }\
58 & \$-0-\text { to } \$ 50,000 \
+88 & \$ 50,001 \text { to } \$ 200,000 \
+128 & \$ 200,001 \text { and above }
\end{array}$ Which of the following statements is false?

Accepted Answer

A)  If Ms. Lui's taxable income is $33,400, her average tax rate is 5%. 
B)  If Mr. Bell's taxable income is $519,900, his marginal tax rate is 12%. 
C)  If Ms. Vern's taxable income is $188,000, her average tax rate is 7.2%. 
D)  None of the choices are false. 
A)  If Ms. Lui's taxable income is $33,400, her average tax rate is 5%. 
B)  If Mr. Bell's taxable income is $519,900, his marginal tax rate is 12%. 
C)  If Ms. Vern's taxable income is $188,000, her average tax rate is 7.2%. 
D)  None of the choices are false.

Question 7

According to supply-side economic theory, a decrease in tax rates for high-income individuals could actually cause an increase in tax revenue.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following statements does not describe the classical standard of tax efficiency?

Accepted Answer

A)  An efficient tax is a neutral factor in a free market economy. 
B)  An efficient tax does not change taxpayer behavior. 
C)  An efficient tax encourages full employment. 
D)  An efficient tax favors a laissez-faire economy policy. 
A)  An efficient tax is a neutral factor in a free market economy. 
B)  An efficient tax does not change taxpayer behavior. 
C)  An efficient tax encourages full employment. 
D)  An efficient tax favors a laissez-faire economy policy.

Question 9

Which of the following describes a tax that meets the standard of convenience?

Accepted Answer

A)  A tax that the government can administer without excessive cost. 
B)  A tax that is easy for taxpayers to compute and pay. 
C)  A tax that minimizes the opportunity for noncompliance. 
D)  All of these describe a convenient tax. 
A)  A tax that the government can administer without excessive cost. 
B)  A tax that is easy for taxpayers to compute and pay. 
C)  A tax that minimizes the opportunity for noncompliance. 
D)  All of these describe a convenient tax.

Question 10

Vervet County levies a real property tax based on the following schedule. $\begin{array}{rr}\text { Rate }&\text { Assessed value }\
38 & \$-0-\text { to } \$ 250,000 \
+18 & \$ 250,001 \text { and above }
\end{array}$ Which of the following statements is false?

Accepted Answer

A)  If Mr. Clem owns real property valued at $112,500, his average tax rate is 3%. 
B)  If Ms. Barker owns real property valued at $455,650, her average tax rate is 2.1%. 
C)  If Ms. Lumley owns real property valued at $750,000, her marginal tax rate is 1%. 
D)  None of the choices are false. 
A)  If Mr. Clem owns real property valued at $112,500, his average tax rate is 3%. 
B)  If Ms. Barker owns real property valued at $455,650, her average tax rate is 2.1%. 
C)  If Ms. Lumley owns real property valued at $750,000, her marginal tax rate is 1%. 
D)  None of the choices are false.

Question 11

A static forecast of the revenue effect of a tax rate change assumes that the tax base does not change.

Accepted Answer

A) True 
 B)False

Question 12

If State H increases its sales tax rate by 1%, its sales tax revenue must also increase by 1%.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following statements concerning the standard of fairness is false?

Accepted Answer

A)  People who believe that a tax is unfair are more likely to evade the tax. 
B)  People believe that the federal income tax is unfair because it contains preferences available only to wealthy individuals. 
C)  The public perception that the federal income tax is unfair has decreased in recent decades. 
D)  None of the choices are false. 
A)  People who believe that a tax is unfair are more likely to evade the tax. 
B)  People believe that the federal income tax is unfair because it contains preferences available only to wealthy individuals. 
C)  The public perception that the federal income tax is unfair has decreased in recent decades. 
D)  None of the choices are false.

Question 14

Which of the following statements about a progressive tax rate structure is false?

Accepted Answer

A)  Progressive rates increase as the tax base increases. 
B)  Progressive rates reflect the theory of the declining marginal utility of income. 
C)  The federal income tax has always used a progressive rate structure. 
D)  Progressive rates result in greater vertical equity than a proportionate rate. 
A)  Progressive rates increase as the tax base increases. 
B)  Progressive rates reflect the theory of the declining marginal utility of income. 
C)  The federal income tax has always used a progressive rate structure. 
D)  Progressive rates result in greater vertical equity than a proportionate rate.

Question 15

The city of Hartwell spends about $3 million annually on snow removal. The city is considering amending its real property tax law to allow homeowners to offset the cost of private snow removal against their annual property tax liability. This amendment would affect the:

Accepted Answer

A)  Fairness of the tax 
B)  Efficiency of the tax 
C)  Sufficiency of the tax 
D)  Convenience of the tax 
A)  Fairness of the tax 
B)  Efficiency of the tax 
C)  Sufficiency of the tax 
D)  Convenience of the tax

Question 16

The federal Social Security tax burden on employees has not increased since 1990 because the tax rate has not increased since that year.

Accepted Answer

A) True 
 B)False

Question 17

Vervet County levies a real property tax based on the following schedule. $\begin{array}{rr}\text { Rate }&\text { Assessed value }\
38 & \$-0-\text { to } \$ 250,000 \
+18 & \$ 250,001 \text { and above }
\end{array}$ Bilex Inc. owns real property valued at $629,800. Compute Bilex's tax on this property.

Accepted Answer

A)  $13,798 
B)  $7,500 
C)  $6,298 
D)  None of the choices are correct. 
A)  $13,798 
B)  $7,500 
C)  $6,298 
D)  None of the choices are correct.

Question 18

Mr. Ohno owns and operates a part-time service business that generates $80,000 annual taxable income. Assume that his federal tax rate on this income is 17%. Because of recent legislation, this rate will increase to 25% next year.
Based on a static forecast, how much additional revenue will the federal government collect from Mr. Ohno next year?How much additional revenue will the federal government collect if Mr. Ohno decides to work fewer hours and consequently earns only $50,000 next year?

Accepted Answer

The federal government will co

Question 19

Government officials of Country Z estimate that next year's public programs will cost $19 million but that tax revenues will be only $15 million. Which of the following statements is false?

Accepted Answer

A)  Country Z's tax system is sufficient. 
B)  Country Z's government is engaging in deficit spending. 
C)  If Country Z must borrow $4 million to pay for its public programs, its national debt will increase by $4 million. 
D)  Country Z's government could balance its budget by eliminating a program that costs $4 million. 
A)  Country Z's tax system is sufficient. 
B)  Country Z's government is engaging in deficit spending. 
C)  If Country Z must borrow $4 million to pay for its public programs, its national debt will increase by $4 million. 
D)  Country Z's government could balance its budget by eliminating a program that costs $4 million.

Question 20

Vervet County levies a real property tax based on the following schedule. $\begin{array}{rr}\text { Rate }&\text { Assessed value }\
38 & \$-0-\text { to } \$ 250,000 \
+18 & \$ 250,001 \text { and above }
\end{array}$ Which type of rate structure does this tax use?

Accepted Answer

A)  Proportionate 
B)  Regressive 
C)  Progressive 
D)  Dual-bracket 
A)  Proportionate 
B)  Regressive 
C)  Progressive 
D)  Dual-bracket

A provision in the tax law designed to encourage a specific economic behavior is a tax preference.

Which of the following statements concerning income tax rate structures is false?

Tax systems with regressive rate structures result in a proportionally heavier tax burden on persons with smaller tax bases.

A progressive rate structure and a proportionate rate structure both result in vertical equity across taxpayers.

According to the Keynesian concept of efficiency, an efficient tax should be neutral in its effect on free market allocations of economic resources.

Jurisdiction M imposes an individual income tax based on the following schedule. Rate Income bracket 58 \- 0- to \ 50,000 +88 \ 50,001 to \ 200,000 +128 \ 200,001 and above Which of the following statements is false?

According to supply-side economic theory, a decrease in tax rates for high-income individuals could actually cause an increase in tax revenue.

Which of the following statements does not describe the classical standard of tax efficiency?

Which of the following describes a tax that meets the standard of convenience?

Vervet County levies a real property tax based on the following schedule. Rate Assessed value 38 \- 0- to \ 250,000 +18 \ 250,001 and above Which of the following statements is false?

A static forecast of the revenue effect of a tax rate change assumes that the tax base does not change.

If State H increases its sales tax rate by 1%, its sales tax revenue must also increase by 1%.

Which of the following statements concerning the standard of fairness is false?

Which of the following statements about a progressive tax rate structure is false?

The city of Hartwell spends about $3 million annually on snow removal. The city is considering amending its real property tax law to allow homeowners to offset the cost of private snow removal against their annual property tax liability. This amendment would affect the:

The federal Social Security tax burden on employees has not increased since 1990 because the tax rate has not increased since that year.

Vervet County levies a real property tax based on the following schedule. Rate Assessed value 38 \- 0- to \ 250,000 +18 \ 250,001 and above Bilex Inc. owns real property valued at $629,800. Compute Bilex's tax on this property.

Government officials of Country Z estimate that next year's public programs will cost $19 million but that tax revenues will be only $15 million. Which of the following statements is false?

Vervet County levies a real property tax based on the following schedule. Rate Assessed value 38 \- 0- to \ 250,000 +18 \ 250,001 and above Which type of rate structure does this tax use?

Taxes and Taxing Jurisdictions

Taxes As Transaction Costs

Maxims of Income Tax Planning

Tax Research

Taxable Income From Business Operations

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Nontaxable Exchanges

Sole Proprietorships, Partnerships, Llcs, and S Corporations

The Corporate Taxpayer

The Choice of Business Entity

Jurisdictional Issues in Business Taxation

The Individual Tax Formula

Compensation and Retirement Planning

Investment and Personal Financial Planning

Tax Consequences of Personal Activities

The Tax Compliance Process

Filters

Exam 2: Policy Standards for a Good Tax

A provision in the tax law designed to encourage a specific economic behavior is a tax preference.

Which of the following statements concerning income tax rate structures is false?

Tax systems with regressive rate structures result in a proportionally heavier tax burden on persons with smaller tax bases.

A progressive rate structure and a proportionate rate structure both result in vertical equity across taxpayers.

According to the Keynesian concept of efficiency, an efficient tax should be neutral in its effect on free market allocations of economic resources.

Jurisdiction M imposes an individual income tax based on the following schedule. Rate Income bracket 58 \- 0- to \ 50,000 +88 \ 50,001 to \ 200,000 +128 \ 200,001 and above Which of the following statements is false?

According to supply-side economic theory, a decrease in tax rates for high-income individuals could actually cause an increase in tax revenue.

Which of the following statements does not describe the classical standard of tax efficiency?

Which of the following describes a tax that meets the standard of convenience?

Vervet County levies a real property tax based on the following schedule. Rate Assessed value 38 \- 0- to \ 250,000 +18 \ 250,001 and above Which of the following statements is false?

A static forecast of the revenue effect of a tax rate change assumes that the tax base does not change.

If State H increases its sales tax rate by 1%, its sales tax revenue must also increase by 1%.

Which of the following statements concerning the standard of fairness is false?

Which of the following statements about a progressive tax rate structure is false?

The city of Hartwell spends about $3 million annually on snow removal. The city is considering amending its real property tax law to allow homeowners to offset the cost of private snow removal against their annual property tax liability. This amendment would affect the:

The federal Social Security tax burden on employees has not increased since 1990 because the tax rate has not increased since that year.

Vervet County levies a real property tax based on the following schedule. Rate Assessed value 38 \- 0- to \ 250,000 +18 \ 250,001 and above Bilex Inc. owns real property valued at $629,800. Compute Bilex's tax on this property.

Government officials of Country Z estimate that next year's public programs will cost $19 million but that tax revenues will be only $15 million. Which of the following statements is false?

Vervet County levies a real property tax based on the following schedule. Rate Assessed value 38 \- 0- to \ 250,000 +18 \ 250,001 and above Which type of rate structure does this tax use?

Taxes and Taxing Jurisdictions

Taxes As Transaction Costs

Maxims of Income Tax Planning

Tax Research

Taxable Income From Business Operations

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Nontaxable Exchanges

Sole Proprietorships, Partnerships, Llcs, and S Corporations

The Corporate Taxpayer

The Choice of Business Entity

Jurisdictional Issues in Business Taxation

The Individual Tax Formula

Compensation and Retirement Planning

Investment and Personal Financial Planning

Tax Consequences of Personal Activities

The Tax Compliance Process

Filters