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Exam 1: An Introduction to Tax

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Question 61

Multiple Choice

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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 2014, what is his effective tax rate (rounded) ?

A) 23.08%
B) 16.70%
C) 14.48%
D) 25.00%
E) None of these

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

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Question 62

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Estimated tax payments are one way the federal income tax system addresses the "certainty" criterion in evaluating tax systems.

A) True
B) False

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Question 63

Multiple Choice

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

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

Junior earns $80,000 taxable income as a regional circuit stock car driver and is taxed at an average rate of 25 percent (i.e., $20,000 of tax). If Congress increases the income tax rate such that Junior's average tax rate increases from 25% to 30%, how much more income tax will he pay assuming that the income effect is larger than the substitution effect? What effect will this tax rate change have on the tax base and tax collected? What will happen to the government's tax revenues if Junior chooses to spend more time pursuing his other passions besides work (e.g., earns only $60,000 in taxable income) in response to the tax rate change? What is the term that describes this type of reaction to a tax rate increase? (Round your answers to two decimal places.)

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

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

The substitution effect:

Congress recently approved a new, bigger budget for the IRS. What taxation concept evaluates the cost of administering our tax law?

Jed Clampett is expanding his family-run beer distributorship into Georgia or Tennessee. His parents began the business many years ago and now three generations of Clampetts work in the family business. Jed will relocate the entire family (his parents, spouse, children, etc.) to either state after the move. What types of taxes may influence his decision of where to locate his business? What non-tax factors may influence the decision?

Earmarked taxes are: