Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

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 3

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 4

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

Accepted Answer

A)  The tax base will not change 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)  The tax base will not change 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 5

Which of the following statements concerning tax preferences is false?

Accepted Answer

A)  Tax preferences increase the complexity of the law. 
B)  Tax preferences raise additional revenue for the government. 
C)  Tax preferences are government subsidies for targeted taxpayer activities. 
D)  Tax preferences do not improve the accurate measurement of the tax base. 
A)  Tax preferences increase the complexity of the law. 
B)  Tax preferences raise additional revenue for the government. 
C)  Tax preferences are government subsidies for targeted taxpayer activities. 
D)  Tax preferences do not improve the accurate measurement of the tax base.

Question 6

Tax liability divided by taxable income equals marginal tax rate.

Accepted Answer

A) True 
 B)False

Question 7

If a tax has a progressive rate structure, a taxpayer's average rate is greater than her marginal rate.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A)  The income effect is theoretically stronger for low-income taxpayers than for high-income taxpayers. 
B)  The income effect is theoretically stronger for a family's secondary wage earner than for the family's primary wage earner. 
C)  The income effect motivates individuals to find ways to increase their before-tax income. 
D)  Both A. and C. are true. 
A)  The income effect is theoretically stronger for low-income taxpayers than for high-income taxpayers. 
B)  The income effect is theoretically stronger for a family's secondary wage earner than for the family's primary wage earner. 
C)  The income effect motivates individuals to find ways to increase their before-tax income. 
D)  Both A. and C. are true.

Question 9

Supply-side economic theory:

Accepted Answer

A)  Predicts that a decrease in the highest income tax rates will cause an increase in government revenues. 
B)  Is inconsistent with the substitution effect. 
C)  Was a clear failure following the Reagan administration tax cuts of the 1980s. 
D)  Predicts that taxpayers will save their tax windfall from a rate cut rather than spend or invest the windfall. 
A)  Predicts that a decrease in the highest income tax rates will cause an increase in government revenues. 
B)  Is inconsistent with the substitution effect. 
C)  Was a clear failure following the Reagan administration tax cuts of the 1980s. 
D)  Predicts that taxpayers will save their tax windfall from a rate cut rather than spend or invest the windfall.

Question 10

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 11

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 12

The City of Willford levies a flat 7% tax on individual income in excess of $55,000. Individuals who earn $55,000 or less pay no income tax.
A. Ms. Vello earned $127,200 income this year. Compute her city income tax and determine her average tax rate.
B. Mr. Sui earned $68,900 income this year. Compute his city income tax and determine his average tax rate.
C. Does Willford have a proportionate, progressive, or regressive tax rate structure?

Accepted Answer

A. Ms. Vello's tax is $5,054 ($72,200 *

Question 13

Which of the following statements about vertical equity is false?

Accepted Answer

A)  Vertical equity focuses on a fair rate structure instead of a fair measurement of the tax base. 
B)  If persons with greater ability to pay owe more tax than persons with lesser ability to pay, the tax is vertically equitable. 
C)  A tax with a single percentage rate is not vertically equitable. 
D)  None of the above is false. 
A)  Vertical equity focuses on a fair rate structure instead of a fair measurement of the tax base. 
B)  If persons with greater ability to pay owe more tax than persons with lesser ability to pay, the tax is vertically equitable. 
C)  A tax with a single percentage rate is not vertically equitable. 
D)  None of the above is false.

Question 14

The U.S. individual income tax has always used a progressive rate structure.

Accepted Answer

A) True 
 B)False

Question 15

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 16

Jurisdiction M imposes an individual income tax based on the following schedule.   Which of the following statements is true?

Accepted Answer

A)  If Mrs. Hall's taxable income is $227,000, her average tax rate is 12%. 
B)  If Mr. Poe's taxable income is $41,200, his marginal tax rate is 8%. 
C)  If Ms. Kaye's taxable income is $63,800, her marginal tax rate is 8%. 
D)  None of the above is true. 
A)  If Mrs. Hall's taxable income is $227,000, her average tax rate is 12%. 
B)  If Mr. Poe's taxable income is $41,200, his marginal tax rate is 8%. 
C)  If Ms. Kaye's taxable income is $63,800, her marginal tax rate is 8%. 
D)  None of the above is true.

Question 17

State use taxes are more convenient for individual consumers than state sales taxes.

Accepted Answer

A) True 
 B)False

Question 18

Jurisdiction M imposes an individual income tax based on the following schedule.   Ms. Owen has $314,000 taxable income. Compute the tax on this income.

Accepted Answer

A)  $29,680 
B)  $28,180 
C)  $37,680 
D)  None of the above 
A)  $29,680 
B)  $28,180 
C)  $37,680 
D)  None of the above

Question 19

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

Accepted Answer

A)  A regressive rate structure cannot result in vertical equity. 
B)  Regressive rates decrease as the tax base increases. 
C)  A regressive rate structure places a proportionally heavier tax burden on taxpayers with smaller tax bases than persons with greater tax bases. 
D)  None of the above is false. 
A)  A regressive rate structure cannot result in vertical equity. 
B)  Regressive rates decrease as the tax base increases. 
C)  A regressive rate structure places a proportionally heavier tax burden on taxpayers with smaller tax bases than persons with greater tax bases. 
D)  None of the above is false.

Question 20

Many taxpayers believe the income tax system is unfair because it is so complicated.

Accepted Answer

A) True 
 B)False

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

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

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:

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

Which of the following statements concerning tax preferences is false?

Tax liability divided by taxable income equals marginal tax rate.

If a tax has a progressive rate structure, a taxpayer's average rate is greater than her marginal rate.

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

Supply-side economic theory:

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

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

Which of the following statements about vertical equity is false?

The U.S. individual income tax has always used a progressive rate structure.

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

Jurisdiction M imposes an individual income tax based on the following schedule. Which of the following statements is true?

State use taxes are more convenient for individual consumers than state sales taxes.

Jurisdiction M imposes an individual income tax based on the following schedule. Ms. Owen has $314,000 taxable income. Compute the tax on this income.

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

Many taxpayers believe the income tax system is unfair because it is so complicated.

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

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

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:

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

Which of the following statements concerning tax preferences is false?

Tax liability divided by taxable income equals marginal tax rate.

If a tax has a progressive rate structure, a taxpayer's average rate is greater than her marginal rate.

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

Supply-side economic theory:

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

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

Which of the following statements about vertical equity is false?

The U.S. individual income tax has always used a progressive rate structure.

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

Jurisdiction M imposes an individual income tax based on the following schedule. Which of the following statements is true?

State use taxes are more convenient for individual consumers than state sales taxes.

Jurisdiction M imposes an individual income tax based on the following schedule. Ms. Owen has $314,000 taxable income. Compute the tax on this income.

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

Many taxpayers believe the income tax system is unfair because it is so complicated.

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