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Exam 1: An Introduction to Tax

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Question 31

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In addition to raising revenues, specific U.S. taxes may have other objectives (e.g., economic or social objectives).

A) True
B) False

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Question 32

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

A) True
B) False

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Question 33

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The difficulty in calculating a tax is typically in the determination of:

In a regressive tax rate system, the marginal tax rate will often be greater than the average tax rate.

The two components of the tax calculation are the tax rate and the taxpayer's status.

Leonardo earns $80,000 of taxable income. He also has $15,000 in city of Tulsa bonds. His 7w7i) fe, Theresa, earns $50,000 of taxable income.If Leonardo and his wife file married filing jointly in 2017, what would be their average tax rate? (Use tax rate schedule.)

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

Bart is contemplating starting his own business. His new business would operate as a sole proprietorship and would require hiring several employees. Describe the employment-related taxes that Bart should be aware of as he starts his new business as a self-employed business owner.

A sales tax is a common example of a progressive tax rate structure.

Horizontal equity is defined in terms of taxpayers in similar situations whereas vertical equity is defined in terms of taxpayers in different situations.

For each of the following, determine if each is a tax and why or why not. a. $2.50 toll paid on the Florida Turnpikeb. $300 ticket for reckless drivingc. 1% local surcharge on hotel rooms to fund public roadways d. 2% city surcharge on wages earned in the city of Philadelphia

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

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

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 2017, what is his effective tax rate? (Use tax rate schedule.)

The estate tax is assessed based on the fair market values of transfers made during a taxpayer's life.

There are several different types of tax rates that taxpayers might use in different contexts. Describe each tax rate and how a taxpayer might use it.

Jackson has the choice to invest in city of Mitchell bonds or Sundial, Inc. corporate bonds th8a7t) pay10% interest. Jackson is a single taxpayer who earns $55,000 annually. Assume that the city ofMitchell bonds and the Sundial, Inc. bonds have similar risk.What interest rate would the city of Mitchell have to pay in order to make Jackson indifferent between investing in the city of Mitchell and the Sundial, Inc. bonds for year 2017?

Which of the following would not be a failure of the horizontal equity concept?

Margaret recently received a parking ticket. This is a common example of a local tax.

The effective tax rate expresses the taxpayer's total tax as a percentage of the taxpayer's taxable and nontaxable income.