Tax Ch 1

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Taxes influence many types of business decisions but generally do not influence personal decisions. True False Taxes influence business decisions such as where a business should locate or how a business should be structured. True False Tax policy rarely plays an important part in presidential campaigns. True False Margaret recently received a parking ticket. This is a common example of a local tax. True False George recently paid $50 to renew his driver's license. The $50 payment is considered a tax. True False A 1% charge imposed by a local government on football tickets sold is not considered a tax if all proceeds are earmarked to fund local schools. True False One key characteristic of a tax is that it is a required payment to a governmental agency. True False Common examples of sin taxes include the taxes imposed on airline tickets and gasoline. True False One benefit of a sin tax (e.g., a tax on cigarettes) is that it should increase the demand for the products being taxed. True False

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10. In addition to raising revenues, specific U.S. taxes may have other objectives (e.g., economic or social objectives). True False 11. The two components of the tax calculation are the tax rate and the taxpayer. True False 12. The tax base for the federal income tax is taxable income. True False 13. A flat tax is an example of a graduated tax system. True False 14. The main difficulty in calculating an income tax is determining the correct amount of the tax base. True False 15. A taxpayer's average tax rate is the most appropriate tax rate to use in tax planning. True False 16. The effective tax rate, in general, provides a better depiction of a taxpayer's tax burden than the average tax rate. True False

17. The effective tax rate expresses the taxpayer's total tax as a percentage of the taxpayer's taxable and nontaxable income. True False 18. In a proportional (flat) tax rate system, the marginal tax rate will always equal the average tax rate. True False 19. In a regressive tax rate system, the marginal tax rate will often be greater than the average tax rate. True False 20. A sales tax is a common example of a progressive tax rate structure. True False 21. In terms of effective tax rates, the sales tax can be viewed as a regressive tax. True False 22. While sales taxes are quite common, currently the U.S. federal government does not impose a sales tax. True False 23. The largest federal tax, in terms of revenue collected, is the social security tax. True False 24. The 9th Amendment to the U.S. Constitution removed all doubt that a federal income tax was allowed under the U.S. Constitution. True False 25. A common example of an employment related tax is the Medicare tax. True False 26. Self employment taxes are charged on self employment income in addition to any federal income tax. True False 27. Excise taxes are typically levied on the value of a good purchased. True False 28. The estate tax is assessed based on the fair market values of transfers made during a taxpayer's life. True False 29. A use tax is typically imposed by a state on goods purchased within the state. True False 30. Property taxes may be imposed on both real and personal property. True False 31. Relative to explicit taxes, implicit taxes are much easier to estimate. True False 32. Implicit taxes are indirect taxes on tax-favored assets. True False 33. Dynamic forecasting does not take into consideration taxpayers' responses to a tax change when estimating tax revenues. True False 34. The income and substitution effects are two opposing effects that one could consider in static forecasting. True False

35. Horizontal equity is defined in terms of taxpayers in similar situations whereas vertical equity is defined in terms of taxpayers in different situations. True False 36. Regressive tax rate structures are typically considered to be vertically equitable. True False 37. Estimated tax payments are one...
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