Ch 1 Reading Assignment

Tori bought a dress costing $80 from Arlene's Dress Shop in a state where there is a sales tax. The tax base is the price of the dress, and the tax rate is 6 percent. What amount of tax did Tori have to pay on the purchase?

$4.80

Andy has two nephews and three nieces. He wants to give each of them the maximum gift he can disburse without having to file a gift tax return. What is the total aggregate amount that Andy can give his two nephews and three nieces in 2022?

$80,000

Shelby bought a dress costing $200 from Arlene's Dress Shop in a state where there is a sales tax rate of 5%. Shelby had to pay ________ dollars in sales tax.

10

Randall is single and has total income from all sources (taxable and nontaxable) of $83,000. His taxable income is $62,000. Randall's tax liability is $11,239. What is Randall's effective tax rate?

13.54%

Arlene is single and has taxable income of $19,000. Her tax liability is currently $2,075. She has the opportunity to earn an additional $5,000 if she accepts and completes a special project at work. There are no additional expenses to offset the $5,000 income. Consequently, Arlene will have a tax liability of $2,675 if she accepts the special project. Arlene has a marginal tax rate of

15

Steven and Sally have income from all sources (taxable and nontaxable) totaling $140,286. Their taxable income is $114,966. Their tax liability is $20,219. Their effective tax rate is

15

Arlene is single and has taxable income of $19,000. Her tax liability is currently $2,075. She has the opportunity to earn an additional $5,000 if she accepts and completes a special project at work. There are no additional expenses to offset the $5,000 income. Consequently, Arlene will have a tax liability of $2,675 if she accepts the special project. Arlene has a marginal tax rate of

15 %

In 2022, the annual gift exclusion totals $16,000, per donee. The unified tax credit exempts up to $12,060,000 in lifetime gifts and bequests upon the death of a taxpayer.

16000, credit

Randall is single and has total income from all sources (taxable and nontaxable) of $83,000. His taxable income is $62,000. Randall's tax liability is $11,239. What is Randall's average tax rate?

18.13%

Arlene is single and has taxable income of $34,000. Her tax liability is currently $4,636. She has the opportunity to earn an additional $6,000 this year. Her tax liability will grow to $5,771 if she receives the additional income. What is Arlene's marginal tax rate for the additional $6,000?

18.92%

Cathy purchases a new computer for $500 in a state where the sales tax rate is 5%. The amount of sales tax that will be added to the purchase is $

25

Roger purchased a new suit for $350. The sales tax rate was 6%. What is the total cost of the suit to Roger?

371

Which of the following definitions describes a tax?

A payment required by a government that is unrelated to any specific benefit or service received from the government.

Marcus and Lydia Brown are married and filing jointly and have $165,000 in taxable income. Lydia has been offered a job promotion which will increase their taxable income to $184,000 in 2022. This additional income will move them into the next graduated tax bracket (24%). Which of the following statements is correct?

A portion of the additional $19,000 will be taxed at 22% and a portion will be taxed at 24%.

The city of Tinderville imposed a 1% tourism tax on all restaurant sales. The proceeds from the tax will be used to promote tourism in the city. What is this type of tax called?

An earmarked tax

Which of the following common decisions would most likely NOT be influenced by the United States income tax laws?

Choosing a public school for your children

Judging the equity of a tax system is best described by which of the following?

Considering how the tax burden should be distributed across taxpayers

Judging the certainty of a tax system is best described by which of the following?

Considering that taxpayers should be able to determine when, where, and how to calculate and pay the tax

Judging the sufficiency of a tax system is best described by which of the following?

Considering whether tax revenues generated are adequate to meet the financial needs of the government

Which of the following criteria are often used to evaluate a good tax system? (Check all that apply.)

Convenience Sufficiency Equity Economy Certainty

A tax that is assessed for a specific purpose is a(n)

Earmarked Tax

Economy is listed as one criteria of a good tax system. What is meant by economy in this context?

Economy requires that the system should minimize compliance and administration costs.

When evaluating a tax system, _________ considers how the tax burden should be distributed across taxpayers.

Equity

Which of the following taxes are known as transfer taxes? (Check all that apply.)

Estate tax Gift tax

A(n) _______ tax is based on the quantity sold of particular products, rather than the monetary amount of the retail selling price.

Excise

Which of the following taxes is based on the quantity of a product sold, rather than the selling price of the product sold?

Excise Tax

True or false: A tax can be defined as a fine or penalty.

False

True or false: The federal estate tax is the MOST significant tax assessed by the U.S. government because it generates more revenue for the government than other types of federal taxes.

False

Which of the following taxes uses a proportional tax rate structure?

Federal corporate income tax

Which of the following taxes uses a progressive tax rate structure?

Federal individual income tax

A(n) ______ tax is defined as the reduced before-tax return that a tax-favored asset produces because of its tax-advantaged status.

Implicit

Since municipal bonds are tax-exempt, they typically earn a lower rate of return than taxable bonds. The lower rate of return relative to taxable bonds is often referred to as a(n) _______ tax.

Implicit

Proportional

Imposes a constant tax rate across the tax base

Regressive

Imposes a decreasing marginal tax rate as the tax base increases

Progressive

Imposes an increasing marginal rate as the tax base increases

Which of the following federal taxes comprises the highest percentage (almost half) of all tax revenues collected by the U.S. government?

Income Tax

Which of the following federal taxes comprises the highest percentage (almost half) of all tax revenues collected by the U.S. government?

Income tax

Most states and the District of Columbia impose _______ __________ on individuals and corporations who earn income within the state. (Enter one word per blank)

Income, Tax

Which of the following statements is correct regarding state income tax?

Many states also impose an income tax on corporations.

Which of the following types of taxes are paid by employers based upon their employees' wages? (Check all that apply.)

Medicare tax Social Security tax Unemployment tax

Is it true that a "tax" is essentially the same as a fine or penalty?

No

Which of the following statements is true regarding taxes?

Political candidates often distinguish themselves from their opponents based on their tax policies.

Which of the following statements is INCORRECT regarding sales tax?

Products purchased on the internet are never subject to sales tax.

Blade pays tax of $5,000 on taxable income of $50,000 while Caden pays tax of $12,000 on taxable income of $100,000. What type of tax rate structure appears to be in force?

Progressive

The federal individual income tax system in the United States uses a(n)

Progressive

he tax base for sales tax is the ____ of goods and certain services provided.

Retail Sales Price

Which of the following taxes are commonly assessed by state and/or local governments? (Check all that apply.)

Sales tax Property tax Income tax

Andrew argues that a tax rate increase will simply cause taxpayers to work more to generate the same after tax dollars as before the tax rate increase. Sally disagrees and believes that taxpayers will engage in more leisure activities since the after tax value of additional work has decreased. The basis of ________ 's argument is the substitution effect, while the basis for _________ 's argument is the income effect.

Sally, Andrew

A tax imposed on a legal product or service that may be addictive in nature is known as a(n):

Sin tax

Which of the following statements is true regarding sin taxes?

Sin taxes discourage undesirable, yet legal, behaviors such as smoking and drinking.

Which tax is assessed to provide monthly retirement, survivor, and disability benefits for qualifying individuals?

Social Security taxes

Which of the following taxes uses a regressive tax rate structure?

Social security tax

________ forecasting ignores that taxpayers may respond to a tax change by changing their behavior. ______ forecasting attempts to account for possible taxpayer responses to the tax law change.

Static; dynamic

Judging the convenience of a tax system is best described by which of the following?

Suggesting that a tax system should be designed to facilitate the collection of tax revenue without undue hardship

Which of the following calculations is correct for determining the amount of tax?

Tax base x tax rate

Which of the following terms describes the level of taxes imposed on the tax base and is usually expressed as a percentage?

Tax rate

The state of Indiana charges a 6% sales tax on most consumer goods. Grant purchased a generator for $400 and paid an additional $24 in sales tax. In this example, what is the "tax base?"

The $400 retail price of the generator

Which of the following statements are correct regarding the history of the U.S. personal income tax? (Check all that apply.)

The 16th Amendment to the U.S. Constitution gives Congress the power to assess income tax on individuals. The income tax was once ruled unconstitutional.

Which of the following sentences describes the average tax rate?

The average level of taxation on each dollar of the taxpayer's taxable income

Which of the following is necessary for a payment to be considered a tax?

The payment is required by a governmental body.

The state of Indiana charges a 6% sales tax on most consumer goods. Grant purchased a generator for $400 and paid an additional $24 in sales tax. In this example, what is the "tax rate?"

The percentage of tax being charged (6%)

Which of the following statements describes implicit taxes?

The reduced before-tax return that a tax-favored asset produces because of its tax-advantaged status

Which of the following statements is INCORRECT regarding use tax?

The retailer is responsible for collecting and remitting the tax to the state where the consumer resides.

Which of the following statements regarding the tax base is correct?

The tax base describes what is actually being taxed.

Which of the following sentences describes the marginal tax rate?

The tax rate applied to the next additional increment of a taxpayer's taxable income (or deductions)

How do taxpayers benefit from taxes paid to a government?

They benefit from government-provided programs and services, such as national defense and public schools.

What is the general purpose of a tax?

To fund the operations of the government

Gift taxes are also known as ____ tax

Transfer tax

True or false: Gasoline sales often have a state excise tax built in to the price that is based on the quantity of fuel purchased rather than the price of the fuel purchased.

True

True or false: The estate tax is based on the fair market value of the estate upon death.

True

True or false: While taxpayers benefit from government-provided programs and services, such as national defense and law enforcement, taxes paid are NOT directly related to any specific benefit received by the taxpayer.

True

The federal income tax is designed on a progressive rate structure so that those taxpayers earning more income are taxed at higher rates than those taxpayers earning less. This structure is based on what premise?

Vertical equity

Which of the following statements are correct regarding a graduated tax? (Check all that apply.)

With a graduated tax, higher income brackets may be assessed a higher tax rate than lower income brackets. With a graduated tax, different portions of a tax base may be taxed at different rates.

Which of the following transactions would NOT likely be subject to an excise tax?

car repair services

The first personal income tax was enacted in 1861 to fund the

civil war

Which of the following criteria is NOT a characteristic of a good tax system?

complexicity

By having employers withhold federal income tax from employees' pay and submitting the payments to the government, the system is adhering to which of the criteria for a good tax system?

convenience

When evaluating a tax system, ________ suggests that the system should be designed to facilitate the collection of tax revenues without undue hardship on the taxpayer or the government.

convenience

The estate tax may also be referred to as the

death

In order to raise revenue in the city of Hamlet, the city considered assessing a local tax on food served in restaurants. When forecasting the amount of revenue that would be generated by the new tax, the budget officials suggested that about 10% of current customers would likely quit eating out in Hamlet and drive to the nearest town. This is an example of:

dynamic forecasting

Property taxes are ad valorem taxes which means that the tax base is the:

fair market value of the property.

A sales tax is an example of a tax that uses a(n) _____ tax rate structure when compared to its tax base.

flat

An example of a tax assessed by a state or local government is

income tax

A(n) Blank______ tax structure applies the same tax rate to all levels of income, while a(n) Blank______ tax structure applies higher tax rates as the tax base increases and a(n) Blank______ tax structure applies lower tax rates as the tax base increases. Multiple choice question.

proportional, progressive, regressive

Assessing the ________ of a tax system means determining the amount of tax revenue needed to fund the government and ensuring that the funds are provided by the system.

sufficiency

Federal estate taxes are also known as

transfer tax

The purpose of ________ tax is to provide temporary income for individuals terminated from their jobs without cause.

unemployement

Which type of tax is based on the retail price of goods owned, possessed, or consumed within a state that were NOT purchased within the state?

use tax