Question 1

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

Accepted Answer

A) True 
 B)False  True

Question 2

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. D

Question 3

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. D

Question 4

Government L levies a 4% excise tax on restaurant meals. It is considering reducing the rate to 2% on meals served in restaurants that ban cigarette and cigar smoking and to increase the rate to 5% in restaurants that allow smoking. Which of the following statements is true?

Accepted Answer

A)  The rate change would improve the neutrality of the excise tax. 
B)  The rate change would improve the convenience of the tax. 
C)  The rate change is intended to affect social behavior. 
D)  Both the rate change would improve the convenience of the tax. and the rate change is intended to affect social behavior are true. 
A)  The rate change would improve the neutrality of the excise tax. 
B)  The rate change would improve the convenience of the tax. 
C)  The rate change is intended to affect social behavior. 
D)  Both the rate change would improve the convenience of the tax. and the rate change is intended to affect social behavior are true.

Question 5

Tax liability divided by taxable income equals marginal tax rate.

Accepted Answer

A) True 
 B)False

Question 6

Congress originally enacted the federal estate and gift taxes to improve:

Accepted Answer

A)  Distributional justice 
B)  Economic efficiency 
C)  Vertical equity 
D)  Horizontal equity 
A)  Distributional justice 
B)  Economic efficiency 
C)  Vertical equity 
D)  Horizontal equity

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

According to the classical 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 9

The statement that "an old tax is a good tax" means that:

Accepted Answer

A)  Changes in the tax law create uncertainty in the business environment. 
B)  Changes in the tax law disrupt traditional planning strategies. 
C)  Changes in the tax law increase the compliance burden on businesses. 
D)  All of the above. 
A)  Changes in the tax law create uncertainty in the business environment. 
B)  Changes in the tax law disrupt traditional planning strategies. 
C)  Changes in the tax law increase the compliance burden on businesses. 
D)  All of the above.

Question 10

A convenient tax has low compliance costs for taxpayers and low collection and enforcement costs for the government.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following statements about the income and substitution effects of an income tax rate increase is true?

Accepted Answer

A)  The income and substitution effects are contradictory behavioral reactions. 
B)  From the government's perspective, the substitution effect is more desirable than the income effect. 
C)  Faith in the income effect is the foundation for supply-side economic theory. 
D)  Dynamic forecasts of incremental tax revenues must consider the potential income effect but not the potential substitution effect of a rate increase. 
A)  The income and substitution effects are contradictory behavioral reactions. 
B)  From the government's perspective, the substitution effect is more desirable than the income effect. 
C)  Faith in the income effect is the foundation for supply-side economic theory. 
D)  Dynamic forecasts of incremental tax revenues must consider the potential income effect but not the potential substitution effect of a rate increase.

Question 12

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

Accepted Answer

A)  An efficient tax encourages economic growth. 
B)  An efficient tax encourages full employment. 
C)  An efficient tax encourages price-level stability. 
D)  All of the above describe the Keynesian standard of tax efficiency. 
A)  An efficient tax encourages economic growth. 
B)  An efficient tax encourages full employment. 
C)  An efficient tax encourages price-level stability. 
D)  All of the above describe the Keynesian standard of tax efficiency.

Question 13

The Internal Revenue Service's cost of collecting $100 of tax revenue is about $3.

Accepted Answer

A) True 
 B)False

Question 14

The city of Berne recently enacted a 10% tax on the price of a subway ticket. Consequently, Mrs. Lane now walks to work instead of taking the subway. Her behavior illustrates the substitution effect of a tax increase.

Accepted Answer

A) True 
 B)False

Question 15

Congress plans to amend the federal individual income tax to eliminate the deductions for medical care, educational savings, charitable contributions, and home mortgage interest. Which of the following statements is true?

Accepted Answer

A)  The amendment will reduce the complexity of the tax. 
B)  The amendment will increase the horizontal equity of the tax. 
C)  The amendment will increase the neutrality of the tax. 
D)  Both the amendment will reduce the complexity of the tax and will increase the neutrality of the tax. 
A)  The amendment will reduce the complexity of the tax. 
B)  The amendment will increase the horizontal equity of the tax. 
C)  The amendment will increase the neutrality of the tax. 
D)  Both the amendment will reduce the complexity of the tax and will increase the neutrality of the tax.

Question 16

The government of Nation C operated at a $32 billion deficit this year. The deficit suggests that Nation C's tax system is:

Accepted Answer

A)  Inefficient 
B)  Insufficient 
C)  Unfair 
D)  Inconvenient 
A)  Inefficient 
B)  Insufficient 
C)  Unfair 
D)  Inconvenient

Question 17

Congress plans to amend the federal income tax to provide a deduction for the cost of energy-efficient fluorescent light bulbs. 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 18

Jurisdiction M imposes an individual income tax based on the following schedule. $$\begin{array} { | c | c | } 
\hline \text { Rate } & \text { Income bracket } \
\hline 5 \% & \$ - 0 - \text { to } \$ 50,000 \
\hline + 8 \% & \$ 50,001 \text { to } \$ 200,000 \
\hline + 12 \% & \$ 200,001 \text { ard above } \
\hline
\end{array}$$ Mr. Coen has $78,000 taxable income. Compute the tax on this income.

Accepted Answer

A)  $4,740 
B)  $6,240 
C)  $8,740 
D)  None of the above 
A)  $4,740 
B)  $6,240 
C)  $8,740 
D)  None of the above

Question 19

The city of Belleview operated at an $865,000 surplus this year. The surplus suggests that the municipal tax system is:

Accepted Answer

A)  Fair 
B)  Efficient 
C)  Sufficient 
D)  Convenient 
A)  Fair 
B)  Efficient 
C)  Sufficient 
D)  Convenient

Question 20

Government J decides that it must increase its tax revenue. Which of the strategies should result in more revenue?

Accepted Answer

A)  Increase the rate of an existing tax. 
B)  Expand the base of an existing tax. 
C)  Enact a tax on a new base. 
D)  All of these strategies should result in more revenue for Government J. 
A)  Increase the rate of an existing tax. 
B)  Expand the base of an existing tax. 
C)  Enact a tax on a new base. 
D)  All of these strategies should result in more revenue for Government J.

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

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?

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

Government L levies a 4% excise tax on restaurant meals. It is considering reducing the rate to 2% on meals served in restaurants that ban cigarette and cigar smoking and to increase the rate to 5% in restaurants that allow smoking. Which of the following statements is true?

Tax liability divided by taxable income equals marginal tax rate.

Congress originally enacted the federal estate and gift taxes to improve:

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

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

The statement that "an old tax is a good tax" means that:

A convenient tax has low compliance costs for taxpayers and low collection and enforcement costs for the government.

Which of the following statements about the income and substitution effects of an income tax rate increase is true?

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

The Internal Revenue Service's cost of collecting $100 of tax revenue is about $3.

The city of Berne recently enacted a 10% tax on the price of a subway ticket. Consequently, Mrs. Lane now walks to work instead of taking the subway. Her behavior illustrates the substitution effect of a tax increase.

Congress plans to amend the federal individual income tax to eliminate the deductions for medical care, educational savings, charitable contributions, and home mortgage interest. Which of the following statements is true?

The government of Nation C operated at a $32 billion deficit this year. The deficit suggests that Nation C's tax system is:

Congress plans to amend the federal income tax to provide a deduction for the cost of energy-efficient fluorescent light bulbs. Which of the following statements is true?

Jurisdiction M imposes an individual income tax based on the following schedule. Rate Income bracket 5\% \ -0- to \ 50,000 +8\% \ 50,001 to \ 200,000 +12\% \ 200,001 ard above Mr. Coen has $78,000 taxable income. Compute the tax on this income.

The city of Belleview operated at an $865,000 surplus this year. The surplus suggests that the municipal tax system is:

Government J decides that it must increase its tax revenue. Which of the strategies should result in more revenue?

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

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

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?

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

Government L levies a 4% excise tax on restaurant meals. It is considering reducing the rate to 2% on meals served in restaurants that ban cigarette and cigar smoking and to increase the rate to 5% in restaurants that allow smoking. Which of the following statements is true?

Tax liability divided by taxable income equals marginal tax rate.

Congress originally enacted the federal estate and gift taxes to improve:

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

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

The statement that "an old tax is a good tax" means that:

A convenient tax has low compliance costs for taxpayers and low collection and enforcement costs for the government.

Which of the following statements about the income and substitution effects of an income tax rate increase is true?

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

The Internal Revenue Service's cost of collecting $100 of tax revenue is about $3.

The city of Berne recently enacted a 10% tax on the price of a subway ticket. Consequently, Mrs. Lane now walks to work instead of taking the subway. Her behavior illustrates the substitution effect of a tax increase.

Congress plans to amend the federal individual income tax to eliminate the deductions for medical care, educational savings, charitable contributions, and home mortgage interest. Which of the following statements is true?

The government of Nation C operated at a $32 billion deficit this year. The deficit suggests that Nation C's tax system is:

Congress plans to amend the federal income tax to provide a deduction for the cost of energy-efficient fluorescent light bulbs. Which of the following statements is true?

Jurisdiction M imposes an individual income tax based on the following schedule. Rate Income bracket 5\% \ -0- to \ 50,000 +8\% \ 50,001 to \ 200,000 +12\% \ 200,001 ard above Mr. Coen has $78,000 taxable income. Compute the tax on this income.

The city of Belleview operated at an $865,000 surplus this year. The surplus suggests that the municipal tax system is:

Government J decides that it must increase its tax revenue. Which of the strategies should result in more revenue?

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