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Exam 1: An Introduction to Tax

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Question 1

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In terms of effective tax rates, the sales tax can be viewed as a regressive tax.

A) True
B) False

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Question 2

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Given the following tax structure, what amount of tax would need to be assessed on Carrie to make the tax horizontally equitable? What is the minimum tax that Simon should pay to make the tax structure vertically equitable based on Fantasia's tax rate? This would result in what type of tax rate structure?

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Horizontal equity means that two taxpaye...

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Question 3

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Which of the following is a tax? I. A 1% special sales tax for funding local road construction. II) A fee paid to the state for a license to practice as an attorney. III) An income tax imposed by Philadelphia on persons working within the city limits. IV) A special property assessment for installing a new water system in the taxpayer's neighborhood.

The city of Granby, Colorado recently enacted a 1.5% surcharge on vacation cabin rentals that will help pay for the city's new elementary school. This surcharge is an example of ________.

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

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

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

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 2018, what is his marginal tax rate (rounded) on this income? (Use tax rate schedule)

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

Which of the following is considered a tax?

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?

Mandy, the mayor of Bogart and a strong advocate of a clean downtown, is proposing an increase in the city sales tax from 7% to 50% on all packs of chewing gum purchased in Bogart. Based on the current gum sales, Mandy estimates that this tax will actually reduce the tax revenue on gum sales. What type of forecasting is Mandy using to derive her tax revenue estimates? What "effect" is her estimate based on? Does this necessarily imply that Mandy will be happy given her desire to have a clean downtown?

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

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

A taxpayer's average tax rate is the most appropriate tax rate to use in tax planning.

Curtis invests $250,000 in a city of Athens bond that pays 7% interest. Alternatively, Curtis could have invested the $250,000 in a bond recently issued by Initech, Inc. that pays 9% interest with similar risk as the city of Athens bond. Assume that Curtis's marginal tax rate is 24%. What is Curtis's after-tax rate of return on the city of Athens bond?

Eliminating the current system of withholding income taxes directly from employee paychecks would:

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

Relative to explicit taxes, implicit taxes are much easier to estimate.

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