Question 1

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 2

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 3

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 4

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 5

A dynamic forecast of the incremental revenue from a tax rate increase presumes that:

Accepted Answer

A)  Taxpayers will not change their behavior because of the rate increase. 
B)  The tax base will increase by the same proportion as the rate increase. 
C)  The tax base will decrease by the same proportion as the rate increase. 
D)  The tax rate and the tax base are correlated. 
A)  Taxpayers will not change their behavior because of the rate increase. 
B)  The tax base will increase by the same proportion as the rate increase. 
C)  The tax base will decrease by the same proportion as the rate increase. 
D)  The tax rate and the tax base are correlated.

Question 6

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 the above 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 the above describe a convenient tax.

Question 7

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 8

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 9

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 10

If a tax has a proportionate rate structure, a taxpayer's marginal rate and average rate are equal.

Accepted Answer

A) True 
 B)False

Question 11

Vervet County levies a real property tax based on the following schedule. $$\begin{array} { | c | c | } 
\hline \text { Rate } & \text { Arered vahe } \
\hline 3 \% & \$ - 0 \text { - to } \$ 250,000 \
\hline + 1 \% & \$ 250,001 \text { ard above } \
\hline
\end{array}$$ 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 above is 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 above is false.

Question 12

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 13

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. The officials could avoid a deficit next year by adopting which of the following fiscal strategies?

Accepted Answer

A)  Reduce the cost of public programs by $4 million. 
B)  Increase taxes by $4 million. 
C)  Borrow $4 million by issuing new government bonds. 
D)  All of these strategies will avoid a deficit. 
A)  Reduce the cost of public programs by $4 million. 
B)  Increase taxes by $4 million. 
C)  Borrow $4 million by issuing new government bonds. 
D)  All of these strategies will avoid a deficit.

Question 14

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 15

Jurisdiction M imposes an individual income tax based on the following schedule. $$\begin{array} { | c | c | } 
\hline \text { Rate } & \text { Income bracket } \
\hline 5 \% & \$ - 0 - \text { to } \$ 50,000 \
\hline + 8 \% & \$ 50,001 \text { to } \$ 200,000 \
\hline + 12 \% & \$ 200,001 \text { ard above } \
\hline
\end{array}$$ 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 16

Vervet County levies a real property tax based on the following schedule. $$\begin{array} { | c | c | } 
\hline \text { Rate } & \text { Arered vahe } \
\hline 3 \% & \$ - 0 \text { - to } \$ 250,000 \
\hline + 1 \% & \$ 250,001 \text { ard above } \
\hline
\end{array}$$ 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

Question 17

Which of the following taxes is most convenient for individuals to pay?

Accepted Answer

A)  Sales tax 
B)  Use tax 
C)  Federal income tax 
D)  Real property tax 
A)  Sales tax 
B)  Use tax 
C)  Federal income tax 
D)  Real property tax

Question 18

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 19

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 20

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

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

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

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

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:

A dynamic forecast of the incremental revenue from a tax rate increase presumes that:

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

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 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?

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

If a tax has a proportionate rate structure, a taxpayer's marginal rate and average rate are equal.

Vervet County levies a real property tax based on the following schedule. Rate Arered vahe 3\% \ -0 - to \ 250,000 +1\% \ 250,001 ard above Which of the following statements is false?

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?

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. The officials could avoid a deficit next year by adopting which of the following fiscal strategies?

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

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 Which type of rate structure does this tax use?

Vervet County levies a real property tax based on the following schedule. Rate Arered vahe 3\% \ -0 - to \ 250,000 +1\% \ 250,001 ard above Which type of rate structure does this tax use?

Which of the following taxes is most convenient for individuals to pay?

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

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

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

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 a proportionate income tax rate structure is false?

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

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

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:

A dynamic forecast of the incremental revenue from a tax rate increase presumes that:

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

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 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?

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

If a tax has a proportionate rate structure, a taxpayer's marginal rate and average rate are equal.

Vervet County levies a real property tax based on the following schedule. Rate Arered vahe 3\% \ -0 - to \ 250,000 +1\% \ 250,001 ard above Which of the following statements is false?

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?

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. The officials could avoid a deficit next year by adopting which of the following fiscal strategies?

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

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 Which type of rate structure does this tax use?

Vervet County levies a real property tax based on the following schedule. Rate Arered vahe 3\% \ -0 - to \ 250,000 +1\% \ 250,001 ard above Which type of rate structure does this tax use?

Which of the following taxes is most convenient for individuals to pay?

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

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

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

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