Tax 503 chapter 1

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

True

Retailers collect sales taxes when consumers purchase taxable goods. By facilitating the collection of the tax, the system is meeting the criteria implemented by 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 term equity means that two taxpayers in similar situations pay the same tax, while equity means that taxpayers with the greater ability to pay tax, pay more tax that taxpayers with less ability to pay.

horizontal, vertical

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

The tax pays the monthly retirement, survivor, and disability benefits for qualifying individuals, whereas the tax pays for medical insurance for individuals who are elderly or disabled. (Enter one word per blank)

social, security, medicare

The tax pays the monthly retirement, survivor, and disability benefits for qualifying individuals, whereas the tax pays for medical insurance for individuals who are elderly or disabled.

social, security, medicare or medicare

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 and gift taxes are also known as taxes.

transfer or death

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

Federal individual income tax

Which tax is assessed to provide medical insurance for individuals who are elderly or disabled?

Medicare tax

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

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

proportional

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

- Sales tax - Income tax - Property tax

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 criteria is NOT a characteristic of a good tax system?

Complexity

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.)

Economy Sufficiency Equity Certainty Convenience

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.

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

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

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

Many states also impose an income tax on corporations.

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

Blade pays tax of $5,000 on taxable income of $50,000 while Caden pays tax of $10,000 on taxable income of $100,000. What type of tax rate structure appears to be in force?

Proportional

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

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

Which of the following sentences describes the average tax rate?

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

What is the tax base for the gift tax?

The fair market value of the gift on the date the gift is given

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.

The estate tax is based on the fair market value of the estate upon death.

True

The social security tax is an example of a(n) tax structure because as the tax base increases, the taxes paid increase, but the marginal tax rate decreases.

regressive

In the Jon Oliver video the IRS does what with money? (Hint: name of a Sandals Adults only resort)

the IRS is said to sextuple the money

What was the example given for a flat tax in the video lecture?

the example provided was a property tax.

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 average tax rate is % (rounded to the nearest whole number).

18%

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%

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

civil war

Federal estate and gift taxes are also known as taxes.

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

When evaluating a tax system, requires that a good tax system minimize the compliance and administration costs associated with the system.

economy

The tax rate is the best measure of the tax burden because it is the average level of tax on all income from taxable and nontaxable sources. The tax rate measures the average level of tax on only taxable income. The tax rate indicates the rate of tax on the next additional increment of income.

effective, average, marginal

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

equity

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

excise

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

fair market value of the property.

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

When evaluating a tax system, suggests that taxpayers should be able to determine when to pay the tax, where to pay the tax, and how to determine the tax.

certainty

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

unemployment

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

Match the evaluation criteria (on the left) with their respective definitions (on the right). Sufficiency Equity Certainty Convenience Economy

- Considers whether tax revenues generated are adequate to meet the financial needs of the government - Considers how the tax burden should be distributed across taxpayers - Considers that taxpayers should be able to determine when, where, and how to calculate and pay the tax - Suggests that a tax system should be designed to facilitate the collection of tax revenue without undue hardship - Considers that the system should minimize compliance and administration costs

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

- Gift Tax - Estate Tax

Match the tax rate structure to its definition. Regressive Progressive Proportional

- Imposes a decreasing marginal tax rate as the tax base increases - Imposes an increasing marginal rate as the tax base increases - Imposes a constant tax rate across the tax base

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

- Unemployment tax - Medicare tax - Social Security tax

Jack has $1,000 to invest. He has a choice between municipal bonds with an interest rate of 4% or corporate bonds with an interest rate of 6%. Jack has a marginal tax rate of 25%. Given this information, Jack should invest in the bonds. The after-tax rate of return on the municipal bonds is % and the after tax rate of return on the corporate bonds is %. The difference in the rates of return is known as taxes.

- corporate - 4% - 4.5% - Implicit

The tax and tax are based on fair market value of the assets being transferred at death or as a gift.

- estate - gift

Property taxes are commonly assessed on property (such as buildings and land) and property (such as cars and boats).

- real - personal

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

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

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

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

A(n) tax is an example of a tax assessed by a state or local government.

income, sales, use, excise, or property

What is the date and final exam for this course?

on-line on January 15, 2020 between 2pm and 4pm

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

progressive

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

proportional, progressive, regressive

The tax base for sales tax is the ______ of goods and certain services provided.

retail sales price

A(n) tax is an example of a tax assessed by a state or local government.

sales