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Exam 1: An Introduction to Tax

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Question 51

True/False

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The main difficulty in calculating an income tax is determining the correct amount of the tax base.

A) True
B) False

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Question 52

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

A) Only issue treasury bonds.
B) Only cut funding to various federal projects.
C) Only increase federal spending.
D) Issue treasury bonds and cut funding to various federal projects but not increase federal spending.
E) None of the choices are correct.

F) A) and B)
G) A) and C)

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Question 53

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

Given the following tax structure, what amount of tax would need to be assessed on Carrie to make the tax horizontally equitable? What is the minimum tax that Simon should pay to make the tax structure vertically equitable based on Fantasia's tax rate? This would result in what type of tax rate structure? $\begin{array} { | l | r | r | } \hline { \text { Taxpayer } } & { \text { Salary } } & \text { Total Tax } \\\hline \text { Fartasia } & 20,000 & 1,500 \\\hline \text { Simon } & 30,000 & 2,000 \\\hline \text { Carrie } & 20,000 & ? ? ? \\\hline\end{array}$

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.

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 would be their average tax rate (rounded) ? (Use tax rate schedule.)

Which of the following statements is true?

The substitution effect:

Geronimo files his tax return as a head of household for year 2019.If his taxable income is $72,000, what is his average tax rate (rounded) ? (Use tax rate schedule.)

Self-employment taxes are charged on self-employment income in addition to any federal income tax.

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

If Susie earns $750,000 in taxable income, how much tax will she pay as a single taxpayer for 2019? (Use tax rate schedule.)

In addition to raising revenues, specific U.S.taxes may have other objectives (e.g., economic or social objectives).

Dynamic forecasting does not take into consideration taxpayers' responses to a tax change when estimating tax revenues.

Taxes influence which of the following decisions?

Fred and Wilma, married taxpayers, earn $100,000 in taxable income and $20,000 in interest from an investment in city of Bedrock bonds.Using the U.S.tax rate schedule for married filing jointly for year 2019, how much federal tax will they owe? What is their average tax rate? What is their effective tax rate? What is their current marginal tax rate? If Fred and Wilma earn an additional $40,000 of taxable income, what is their marginal tax rate on this income? (Round the tax rates to two decimal places, e.g., .12345 as 12.35 percent.)(Use tax rate schedule.)

Heather, a single taxpayer who files as a head of household, earns $60,000 in taxable income and $5,000 in interest from an investment in city of Oxford bonds.Using the U.S.tax rate schedule for year 2019, how much federal tax will she owe? What is her average tax rate? What is her effective tax rate? What is her current marginal tax rate? If Heather has an additional $20,000 of tax deductions, what is her marginal tax rate on these deductions? (Round the tax rates to two decimal places, e.g., .12345 as 12.35 percent.)(Use tax rate schedule).

Given the following tax structure, what is the minimum tax that would need to be assessed on Lizzy to make the tax progressive with respect to average tax rates? What is the minimum tax that would need to be assessed on Lizzy to make the tax progressive with respect to effective tax rates? $\begin{array} { | l | r | r | r | } \hline { \text { Tuxpayer } } & \text { Salary } & { \text { Muni-Band Interest } } & { \text { Total Tax } } \\\hline \text { Mort } & 20,000 & 5,000 & 4,000 \\\hline \text { Lizzy } & 80,000 & 30,000 & ? ? ? \\\hline\end{array}$

Which of the following is false?

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. How much money would Leonardo and Theresa save if they file jointly instead of separately for 2019? (Use tax rate schedule.)