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Exam 1: An Introduction to Tax

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Question 21

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The substitution effect:

A) Predicts that taxpayers will work harder to pay for consumer products when tax rates increase.
B) Is one of the effects considered in static forecasting.
C) Results in the government collecting more aggregate tax revenue than under the income effect.
D) Is typically more descriptive for taxpayers with lower disposable income.
E) None of the choices are correct.

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

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Question 22

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Oswald is beginning his first tax course and does not really have a solid understanding of the role that taxes play in various decisions.Please describe for Oswald the various types of decisions that taxes may influence.

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Taxes are a part of everyday life and ha...

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Question 23

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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?

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

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

Which of the following is true?

The 9ᵗʰ Amendment to the U.S.Constitution removed all doubt that a federal income tax was allowed under the U.S.Constitution.

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

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

Earmarked taxes are:

Ariel invests $50,000 in a city of Las Vegas bond that pays 5% interest.Alternatively,Ariel could have invested the $50,000 in a bond recently issued by Jittery Joe's,Inc.that pays 8% interest with similar non-tax characteristics as the city of Las Vegas bond (e.g.,similar risk).Assume that Ariel's marginal tax rate is 25%.What is her after-tax rate of return for the city of Las Vegas bond? For the Jittery Joe's,Inc.bond? How much explicit tax does Ariel pay on the city of Las Vegas bond? How much implicit tax does she pay on the city of Las Vegas bond? How much explicit tax would she have paid on the Jittery Joe's,Inc.bond? Which bond should she choose?

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.

The effective tax rate,in general,provides a better depiction of a taxpayer's tax burden than the average tax rate.

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.

If Susie earns $750,000 in taxable income,how much tax will she pay as a single taxpayer for year 2017? (Use tax rate schedule in the text)

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

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

Which of the following is true regarding use taxes?

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

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