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Exam 1: An Introduction to Tax

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Question 51

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Implicit taxes are indirect taxes on tax-favored assets.

A) True
B) False

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Question 52

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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 53

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What is Manny's current marginal tax rate for year 2014?

In considering the "economy" criterion in evaluating tax systems, one must consider this criterion from both the taxpayer and the government's perspective.

Property taxes may be imposed on both real and personal property.

If Susie earns $750,000 in taxable income and files as head of household for year 2014, what is Susie's average tax rate (rounded) ?

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

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

Self employment taxes are charged on self employment income in addition to any federal income tax.

What is Leonardo and Theresa's effective tax rate for year 2014 (rounded) ?

Junior earns $80,000 taxable income as a regional circuit stock car driver and is taxed at an average rate of 25 percent (i.e., $20,000 of tax). If Congress increases the income tax rate such that Junior's average tax rate increases from 25% to 30%, how much more income tax will he pay assuming that the income effect is larger than the substitution effect? What effect will this tax rate change have on the tax base and tax collected? What will happen to the government's tax revenues if Junior chooses to spend more time pursuing his other passions besides work (e.g., earns only $60,000 in taxable income) in response to the tax rate change? What is the term that describes this type of reaction to a tax rate increase? (Round your answers to two decimal places.)

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

How much explicit tax would Curtis incur on interest earned on the Initech, Inc. bond?

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

One key characteristic of a tax is that it is a required payment to a governmental agency.

A common example of an employment related tax is the Medicare tax.

If Leonardo earned an additional $30,000 of taxable income this year, what would be the marginal tax rate (rounded) on the extra income for year 2014?

Assume the original facts as given except that Jackson is a head of household taxpayer and the city of Mitchell pays interest of 7.8%. How would you advise Jackson to invest his money?

Given the following tax structure, what is the minimum tax that would need to be assessed on Dora to make the tax progressive with respect to average tax rates? What is the minimum tax that would need to be assessed on Dora to make the tax progressive with respect to effective tax rates? $\begin{array}{lrrc}Taxpayer&Salary&\text{Muni-Bond Interest}&\text{Total Tax}\\\hline\\\text { Diego } & 30,000 & 10,000 & 1,500 \\\text { Dora } & 50,000 & 5,000 & ? ? ?\end{array}$

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