Question 1

Which of the following statements about the substitution effect of an income tax rate increase is false?

Accepted Answer

A) The substitution effect is theoretically stronger for high-income taxpayers than for low-income taxpayers. 
B) The substitution effect is theoretically stronger for a family's secondary wage earner than for the family's primary wage earner. 
C) The substitution effect is theoretically stronger for self-employed individuals who control their own time than for employees whose work schedules are controlled by their employers. 
D) None of the above is false. 
A) The substitution effect is theoretically stronger for high-income taxpayers than for low-income taxpayers. 
B) The substitution effect is theoretically stronger for a family's secondary wage earner than for the family's primary wage earner. 
C) The substitution effect is theoretically stronger for self-employed individuals who control their own time than for employees whose work schedules are controlled by their employers. 
D) None of the above is false.

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) A theoretic justification for a proportionate rate is its superior potential for wealth redistribution. 
B) Under a proportionate rate structure,the marginal rate equals the average rate. 
C) Under a proportionate rate structure,the taxpayer with the least income pays the same percentage of income to the government as the taxpayer with the most income. 
D) None of the above is false. 
A) A theoretic justification for a proportionate rate is its superior potential for wealth redistribution. 
B) Under a proportionate rate structure,the marginal rate equals the average rate. 
C) Under a proportionate rate structure,the taxpayer with the least income pays the same percentage of income to the government as the taxpayer with the most income. 
D) None of the above is false.

Question 4

Jurisdiction F levies a 10% excise tax on the purchase of golf carts.The annual revenue from this tax averages $800,000 (10% * $8 million average annual golf cart purchases).Jurisdiction F is considering raising the tax rate to 12%.Which of the following statements is true?

Accepted Answer

A) The rate increase will increase revenue by $160,000. 
B) Based on a dynamic forecast,the rate increase will increase revenue by $160,000. 
C) Based on a static forecast,the rate increase will increase revenue by $160,000. 
D) None of the above is true. 
A) The rate increase will increase revenue by $160,000. 
B) Based on a dynamic forecast,the rate increase will increase revenue by $160,000. 
C) Based on a static forecast,the rate increase will increase revenue by $160,000. 
D) None of the above is true.

Question 5

The theory of distributional justice is a rationale for a progressive income tax system.

Accepted Answer

A) True 
 B)False

Question 6

The declining marginal utility of income across individuals can be measured empirically.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statements about tax rate structures is true?

Accepted Answer

A) Regressive rate structures are illegal in the United States. 
B) A tax with a graduated rate structure must be either regressive or progressive. 
C) A proportionate rate structure is the only structure resulting in vertical equity. 
D) None of the above is true. 
A) Regressive rate structures are illegal in the United States. 
B) A tax with a graduated rate structure must be either regressive or progressive. 
C) A proportionate rate structure is the only structure resulting in vertical equity. 
D) None of the above is true.

Question 8

The federal government is not required to pay interest on the national debt.

Accepted Answer

A) True 
 B)False

Question 9

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 10

Jurisdiction M imposes an individual income tax based on the following schedule.     Which type of rate structure does this tax use?

Accepted Answer

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

Question 11

Mr.and Mrs.Boln earn $63,000 annual income and pay 20% in state and federal income tax.If tax rates increase so that the couple's annual rate increases to 25%,how much additional income must they earn to maintain their after-tax standard of living?

Accepted Answer

The Bolns' after-tax income before the r

Question 12

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 above is 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 above is false.

Question 13

Mr.Ohno owns and operates a part-time service business that generates $80,000 annual taxable income.His federal tax rate on this income is 17%.Because of recent legislation,this rate will increase to 25% next year.
A.Based on a static forecast,how much additional revenue will the federal government collect from Mr.Ohno next year?
B.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

A.The federal government will

Question 14

The sales tax laws of many states exempt the purchase of groceries and prescription drugs from tax.Such exemptions are intended to improve the:

Accepted Answer

A) Convenience of the tax 
B) Equity of the tax 
C) Sufficiency of the tax 
D) Neutrality of the tax 
A) Convenience of the tax 
B) Equity of the tax 
C) Sufficiency of the tax 
D) Neutrality of the tax

Question 15

The state of California plans to amend its personal income tax laws to allow parents to reduce their tax by the cost of infant car seats.Which of the following statements is true?

Accepted Answer

A) The amendment creates a tax preference for parents who purchase infant car seats. 
B) The amendment is intended to change social behavior. 
C) The amendment increases the neutrality of the tax law. 
D) Both the amendment creates a tax preference for parents who purchase infant car seats and is also intended to change social behavior are true. 
A) The amendment creates a tax preference for parents who purchase infant car seats. 
B) The amendment is intended to change social behavior. 
C) The amendment increases the neutrality of the tax law. 
D) Both the amendment creates a tax preference for parents who purchase infant car seats and is also intended to change social behavior are true.

Question 16

Congress recently amended the tax law to make it easier for individuals to file their income tax returns electronically (online).Which of the following statements is true?

Accepted Answer

A) The amendment is intended to improve the efficiency of the tax. 
B) The amendment is intended to improve the equity of the tax. 
C) The amendment is intended to improve the simplicity of the tax. 
D) The amendment is intended to improve the convenience of the tax. 
A) The amendment is intended to improve the efficiency of the tax. 
B) The amendment is intended to improve the equity of the tax. 
C) The amendment is intended to improve the simplicity of the tax. 
D) The amendment is intended to improve the convenience of the tax.

Question 17

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 18

The federal income tax law allows individuals whose property is destroyed by a natural disaster such as a fire or hurricane to reduce their taxable income by the amount of their financial loss.This rule is intended to improve the:

Accepted Answer

A) Convenience of the tax 
B) Efficiency of the tax 
C) Horizontal equity of the tax 
D) Vertical equity of the tax 
A) Convenience of the tax 
B) Efficiency of the tax 
C) Horizontal equity of the tax 
D) Vertical equity of the tax

Question 19

The country of Valhalla levies an income tax with the following rate structure.     A.Mrs.Greene's annual income is $125,000.Compute her tax,her average tax rate,and her marginal tax rate.
B.Mr.Chen's annual income is $220,000.Compute his tax,his average tax rate,and his marginal tax rate.
C.Does Valhalla have a proportionate,progressive,or regressive tax rate structure?

Accepted Answer

A.Mrs.Greene's tax is $10,000 = (5% × $5

Question 20

Which of the following statements concerning a regressive tax rate structure is true?

Accepted Answer

A) A regressive tax rate structure is justified by the tax policy of distributive justice. 
B) A regressive rate structure is justified by the theory of the declining marginal utility of income. 
C) Under a regressive rate structure,the average tax rate for high-income taxpayers is less than the marginal tax rate. 
D) None of the above statements is true. 
A) A regressive tax rate structure is justified by the tax policy of distributive justice. 
B) A regressive rate structure is justified by the theory of the declining marginal utility of income. 
C) Under a regressive rate structure,the average tax rate for high-income taxpayers is less than the marginal tax rate. 
D) None of the above statements is true.

Which of the following statements about the substitution effect of an income tax rate increase is false?

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

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

Jurisdiction F levies a 10% excise tax on the purchase of golf carts.The annual revenue from this tax averages $800,000 (10% * $8 million average annual golf cart purchases).Jurisdiction F is considering raising the tax rate to 12%.Which of the following statements is true?

The theory of distributional justice is a rationale for a progressive income tax system.

The declining marginal utility of income across individuals can be measured empirically.

Which of the following statements about tax rate structures is true?

The federal government is not required to pay interest on the national debt.

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

Jurisdiction M imposes an individual income tax based on the following schedule. Which type of rate structure does this tax use?

Mr.and Mrs.Boln earn $63,000 annual income and pay 20% in state and federal income tax.If tax rates increase so that the couple's annual rate increases to 25%,how much additional income must they earn to maintain their after-tax standard of living?

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

The sales tax laws of many states exempt the purchase of groceries and prescription drugs from tax.Such exemptions are intended to improve the:

The state of California plans to amend its personal income tax laws to allow parents to reduce their tax by the cost of infant car seats.Which of the following statements is true?

Congress recently amended the tax law to make it easier for individuals to file their income tax returns electronically (online).Which of the following statements is true?

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

The federal income tax law allows individuals whose property is destroyed by a natural disaster such as a fire or hurricane to reduce their taxable income by the amount of their financial loss.This rule is intended to improve the:

Which of the following statements concerning a regressive tax rate structure is true?

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

Which of the following statements about the substitution effect of an income tax rate increase is false?

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

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

Jurisdiction F levies a 10% excise tax on the purchase of golf carts.The annual revenue from this tax averages $800,000 (10% * $8 million average annual golf cart purchases).Jurisdiction F is considering raising the tax rate to 12%.Which of the following statements is true?

The theory of distributional justice is a rationale for a progressive income tax system.

The declining marginal utility of income across individuals can be measured empirically.

Which of the following statements about tax rate structures is true?

The federal government is not required to pay interest on the national debt.

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

Jurisdiction M imposes an individual income tax based on the following schedule. Which type of rate structure does this tax use?

Mr.and Mrs.Boln earn $63,000 annual income and pay 20% in state and federal income tax.If tax rates increase so that the couple's annual rate increases to 25%,how much additional income must they earn to maintain their after-tax standard of living?

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

The sales tax laws of many states exempt the purchase of groceries and prescription drugs from tax.Such exemptions are intended to improve the:

The state of California plans to amend its personal income tax laws to allow parents to reduce their tax by the cost of infant car seats.Which of the following statements is true?

Congress recently amended the tax law to make it easier for individuals to file their income tax returns electronically (online).Which of the following statements is true?

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

The federal income tax law allows individuals whose property is destroyed by a natural disaster such as a fire or hurricane to reduce their taxable income by the amount of their financial loss.This rule is intended to improve the:

Which of the following statements concerning a regressive tax rate structure is true?

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