Tax Rate Structure

Score: 10/10 Points                   100 %

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

 Progressive tax rate structure

✓ Proportional tax rate structure

 U.S. federal income tax

 Regressive tax rate structure

 None of the choices are correct

A proportional tax rate structure, also known as a flat tax, imposes a constant tax rate throughout the tax base.

References

Multiple Choice                                                                    Difficulty: 2 Medium Learning Objective: 01-03 Describe the different tax rate structures and calculate a tax.

 2.

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

 the correct tax rate.

 where to file the tax return.

✓ the tax base.

 the due date for the return.

 None of the choices are correct.

References

Multiple Choice                                                                    Difficulty: 2 Medium Learning Objective: 01-03 Describe the different tax rate structures and calculate a tax.

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

 Proportional

✓ Equitable

 Regressive

 Progressive

 All of these are different kinds of the basic tax rate structures

References

Multiple Choice                                                                    Difficulty: 2 Medium Learning Objective: 01-03 Describe the different tax rate structures and calculate a tax.

 4.

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 2019, what is his average tax rate (rounded)? (Round your final answer to two decimal places.) (Use tax rate schedule.) rev: 09_24_2019_QC_CS-182314

✓ 15.10 percent

 12.73 percent

 11.35 percent

 22.00 percent

 None of the choices are correct

15.10% = $9,059 / $60,000

References

Multiple Choice                                                                    Difficulty: 2 Medium Learning Objective: 01-03 Describe the different tax rate structures and calculate a tax.

 5.

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 2019, what is his effective tax rate (rounded)? (Round your final answer to two decimal places.) (Use tax rate schedule.) rev: 09_24_2019_QC_CS-182314

 20.31 percent

✓ 13.94 percent  11.75 percent

 10.48 percent

 None of the choices are correct

13.94% = $9,059 / ($60,000 + $5,000)

References

Multiple Choice                                                                    Difficulty: 2 Medium Learning Objective: 01-03 Describe the different tax rate structures and calculate a tax.

The city of Granby, Colorado, recently enacted a 1.5 percent surcharge on vacation cabin rentals that will fund the city's new elementary school. This surcharge is an example of _____.

 a sin tax to discourage undesirable behavior

 a government fine

✓ an earmarked tax

 a sin tax to discourage undesirable behavior and an earmarked tax

 None of the choices are correct

References

Multiple Choice                                                                    Difficulty: 2 Medium Learning Objective: 01-02 Discuss what constitutes a tax and the general objectives of taxes.

 7.

Which of the following is false?

 A proportional tax rate structure imposes a constant tax rate while a progressive tax rate structure imposes an increasing marginal rate related to the tax base.

✓ The average tax rate changes under a proportional tax rate structure, but it is static for a progressive tax rate system.

 An example of a proportional tax is the tax on gasoline.

 An example of a progressive tax is the federal tax on gifts.

 None of the choices are correct.

References

Multiple Choice                                                                    Difficulty: 3 Hard        Learning Objective: 01-03 Describe the different tax rate structures and calculate a tax.

The ultimate economic burden of a tax is best captured by:

 the marginal tax rate. ✓ the effective tax rate.

 the average tax rate.

 the proportional tax rate.

 None of the choices are correct.

References

Multiple Choice                                                                    Difficulty: 2 Medium Learning Objective: 01-03 Describe the different tax rate structures and calculate a tax.

 9.

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

✓ Sales tax

 Individual income tax

 Other

 Property tax

 None of the choices are correct

See Exhibit 1-5 in textbook.

References

Multiple Choice                                                                    Difficulty: 2 Medium Learning Objective: 01-04 Identify the various federal, state, and local taxes.

Which of the following is true regarding use taxes?

 A use tax is relatively easy to enforce compared to a sales tax.

✓ Use taxes attempt to eliminate any tax advantage of purchasing goods out of state.

 Use taxes encourage taxpayers to buy goods out of state to avoid paying sales tax in their home state.

 A use tax is generally a progressive tax.

 None of the choices are correct.

References

Multiple Choice                                                                    Difficulty: 2 Medium Learning Objective: 01-04 Identify the various federal, state, and local taxes.

 11.

Which of the following statements is true?

 Municipal bond interest is subject to explicit federal tax.

✓ Municipal bond interest is subject to implicit tax.

 Municipal bonds typically pay a higher interest rate than corporate bonds with similar risk.

 All of these statements are true.

 None of these statements are true.

References

Multiple Choice                                                                    Difficulty: 2 Medium Learning Objective: 01-04 Identify the various federal, state, and local taxes.

The substitution effect:

 predicts that taxpayers will work harder to pay for consumer products when tax rates increase.

 is one of the effects considered in static forecasting.

 results in the government collecting more aggregate tax revenue than under the income effect.

 is typically more descriptive for taxpayers with lower disposable income.

✓ None of the choices are correct.

References

Multiple Choice                                                                    Difficulty: 2 Medium Learning Objective: 01-05 Apply appropriate criteria to evaluate alternative tax systems.

 13.

Which of the following federal government actions would make sense if a tax system fails to provide sufficient tax revenue?

 Only issue treasury bonds.

 Only cut funding to various federal projects.

 Only increase federal spending.

✓ Issue treasury bonds and cut funding to various federal projects but not increase federal spending.

 None of the choices are correct.

References

Multiple Choice                                                                    Difficulty: 2 Medium Learning Objective: 01-05 Apply appropriate criteria to evaluate alternative tax systems.

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?

 The ability to pay principle

 Horizontal equity

✓ Substitution effect

 Vertical equity

 None of the choices are correct

References

Multiple Choice                                                                    Difficulty: 2 Medium Learning Objective: 01-05 Apply appropriate criteria to evaluate alternative tax systems.

 15.

Which of the following is true regarding tax-advantaged assets?

 They are typically subject to excise taxes to account for their low explicit taxes.

 A corporate bond is typically considered a tax-advantaged asset.

✓ They are often subject to implicit taxes.

 A corporate bond is typically considered a tax-advantaged asset. They are often subject to implicit taxes but they are not typically subject to excise taxes to account for their low explicit taxes.

 None of the choices are correct.

References

Multiple Choice                                                                    Difficulty: 2 Medium Learning Objective: 01-04 Identify the various federal, state, and local taxes.

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

✓ Convenience  Certainty

 Economy

 Equity

 None of the choices are correct

References

Multiple Choice                                                                    Difficulty: 2 Medium Learning Objective: 01-05 Apply appropriate criteria to evaluate alternative tax systems.

Manny, a single taxpayer, earns $65,000 per year in taxable income and an additional $12,000 per year in city of Boston bonds. What is Manny's current marginal tax rate for 2019? (Use tax rate schedule.)

 11.40 percent

 12.00 percent

 13.19 percent

 15.63 percent

✓ None of the choices are correct.

See IRS tax schedule for single filers; 22 percent.

References

Multiple Choice                                                                    Difficulty: 1 Easy        Learning Objective: 01-03 Describe the different tax rate structures and calculate a tax.

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 2019, what is his marginal tax rate (rounded) on this income? (Use tax rate schedule.)

 18.01 percent

 22.00 percent

✓ 22.90 percent

 24.00 percent

 None of the choices are correct

($18,175 – $10,159) / ($100,000 − $65,000) = 22.90%

References

Multiple Choice                                                                    Difficulty: 3 Hard       Learning Objective: 01-03 Describe the different tax rate structures and calculate a tax.

Leonardo, who is married but files separately, earns $80,000 of taxable income. He also has $15,000 in city of Tulsa bonds. His wife, Theresa, earns $50,000 of taxable income.

If Leonardo and his wife file married filing jointly in 2019, What is Leonardo and Theresa's effective tax rate for 2019 (rounded)? (Use tax rate schedule.)

 12.00 percent

 15.63 percent

 21.04 percent

 22.00 percent

✓ None of the choices are correct

$20,317 / ($80,000 + $50,000 + $15,000) = 14.01%

References

Multiple Choice                                                                    Difficulty: 2 Medium Learning Objective: 01-03 Describe the different tax rate structures and calculate a tax.

If Susie earns $750,000 in taxable income and files as head of household for year 2019, what is Susie's average tax rate (rounded)? (Use tax rate schedule.)

✓ 32.14 percent

 33.85 percent

 35.00 percent

 37.00 percent

 None of the choices are correct

[$153,380 + 0.37($750,000 − $510,300)] / $750,000 = 32.14%

References

Multiple Choice                                                                    Difficulty: 2 Medium Learning Objective: 01-03 Describe the different tax rate structures and calculate a tax.

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