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Exam 1: An Introduction to Tax

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Question 21

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Which of the following is false?

A) A proportional tax rate structure imposes a constant tax rate while a progressive tax rate structure imposes an increasing marginal rate related to the tax base
B) The average tax rate changes under a proportional tax rate structure, but it is static for a progressive tax rate system
C) An example of a proportional tax is the tax on gasoline
D) An example of a progressive tax is the federal tax on gifts
E) None of these

F) All of the above
G) A) and E)

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Question 22

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Congress would like to increase tax revenues by 20 percent. Assume that the average taxpayer in the United States earns $80,000 and pays an average tax rate of 17.5%. If the income effect is larger than the substitution effect, what average tax rate will result in a 20 percent increase in tax revenues? This is an example of what type of forecasting?

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Question 23

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Taxes influence which of the following decisions?

Which of the following statements is true?

Taxes influence business decisions such as where a business should locate or how a business should be structured.

Namratha has the choice between investing in a city of Watkinsville bond at 4.5% or a Moe's, Inc. bond at 7%. Assuming that both bonds have the same non-tax characteristics and that Namratha has a 25% marginal tax rate, in which bond should she invest? What interest rate offered by Moe's, Inc. would make Namratha indifferent between investing in the two bonds?

Dynamic forecasting does not take into consideration taxpayers' responses to a tax change when estimating tax revenues.

Implicit taxes are indirect taxes on tax-favored assets.

Marc, a single taxpayer, earns $60,000 in taxable income and $5,000 in interest from an investment in city of Birmingham Bonds. Using the U.S. tax rate schedule for year 2014, what is his effective tax rate (rounded) ?

Fred and Wilma, married taxpayers, earn $100,000 in taxable income and $20,000 in interest from an investment in city of Bedrock Bonds. Using the U.S. tax rate schedule for married filing jointly for year 2014, how much federal tax will they owe? What is their average tax rate? What is their effective tax rate? What is their current marginal tax rate? If Fred and Wilma earn an additional $40,000 of taxable income, what is their marginal tax rate on this income? (Round the tax rates to 2 decimal places, e.g., .12345 as 12.35%)

A use tax is typically imposed by a state on goods purchased within the state.

Common examples of sin taxes include the taxes imposed on airline tickets and gasoline.

The income and substitution effects are two opposing effects that one could consider in static forecasting.

Which of the following is true regarding real property taxes and personal property taxes?

Margaret was issued a $150 speeding ticket. This is:

Which of the following is not one of the basic tax rate structures?

A 1% charge imposed by a local government on football tickets sold is not considered a tax if all proceeds are earmarked to fund local schools.

How much money would Leonardo and Theresa save if they filed jointly instead of separately for year 2014?

Jonah, a single taxpayer, earns $150,000 in taxable income and $10,000 in interest from an investment in city of Denver Bonds. Using the U.S. tax rate schedule for year 2014, how much federal tax will he owe? What is his average tax rate? What is his effective tax rate? What is his current marginal tax rate? If Jonah earned an additional $40,000 of taxable income, what is his marginal tax rate on this income? (Round the tax rates to 2 decimal places, e.g., .12345 as 12.35%)

Employers often withhold federal income taxes directly from worker's paychecks. This is an example of which principle in practice?