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Exam 1: An Introduction to Tax

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Question 21

True/False

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George recently paid $50 to renew his driver's license. The $50 payment is considered a tax.

A) True
B) False

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Question 22

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

A) Convenience
B) Certainty
C) Economy
D) Equity
E) None of these

F) C) and D)
G) B) and E)

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Question 23

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A flat tax is an example of a graduated tax system.

In a proportional (flat) tax rate system, the marginal tax rate will always equal the average tax rate.

Manny, a single taxpayer, earns $65,000 per year in taxable income and an additional $12,000 per year in city of Boston bonds. If Manny earns an additional $35,000 in taxable income in year 2016, what is his marginal tax rate (rounded) on this income?

Heather, a single taxpayer who files as a head of household, earns $60,000 in taxable income and $5,000 in interest from an investment in city of Oxford Bonds. Using the U.S. tax rate schedule for year 2016, how much federal tax will she owe? What is her average tax rate? What is her effective tax rate? What is her current marginal tax rate? If Heather has an additional $20,000 of tax deductions, what is her marginal tax rate on these deductions? (Round the tax rates to 2 decimal places, e.g., .12345 as 12.35%)

Consider the following tax rate structure. Is it horizontally equitable? Why or why not? Is it vertically equitable? Why or why not? $\begin{array} { l | r | r | r } \text { Taxpayer } & \text { Salary } & \text { Mun-Bond Interest } & \text { Total Tax } \\\hline \text { Diego } & 30,000 & 10,000 & 1,500 \\\text { Dora } & 50,000 & 5,000 & ? ? ? \\\hline\end{array}$

Earmarked taxes are:

Which of the following is true regarding use taxes?

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 2016, what is his effective tax rate (rounded) ?

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 2016, what is his current marginal tax rate?

Excise taxes are typically levied on the value of a good purchased.

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 2016, 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%)

Which of the following represents the largest percentage of average state tax revenue?

Evaluate the U.S. federal tax system on the certainty and economy criteria.

Al believes that SUVs have negative social and environmental effects because of their increased carbon monoxide emissions. He proposes eliminating sales taxes on smaller automobiles in favor of higher sales taxes levied on SUVs. Al performs some calculations and comes to the conclusion that based on the current number of SUVs owned in the U.S. exactly the same amount of total sales tax will be collected under his reformed system. Which of the following concepts explains why Al's idea may not work?

Which of the following is not an example of a graduated tax rate structure?

The state of Georgia recently increased its tax on a carton of cigarettes by $2.00. What type of tax is this?

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 2016, 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%)

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