Tax

In a regressive tax rate structure:

Question 1 options:

	the average tax rate can never vary with the size of the tax subsidy.
	the average tax rate decreases as the size of the tax base increases.
	average tax rate increases with the size of the tax.
	the average tax rate is lower than any other tax rate.

Question 2 (10 points)

A Specific  tax

Question 2 options:

	applies to all transactions at a level of economic activity.
	applies to the number of physical units bought or sold.
	is not legal at the state level.
	applies to the value (number of units time price per unit) of the transaction.

Question 3 (10 points)

The marginal tax rate equals:

Question 3 options:

	tax paid divided by the appropriate measure of affluence and ability to interpret the law.
	the amount by which a taxpayer’s tax would increase from an additional dollar of the tax base.
	the tax liability resulting from false application of the tax statutes.
	the tax rate required to balance the budget.

Question 4 (10 points)

The idea that individuals with the same economic capacity should pay the same tax represents:

Question 4 options:

	vertical equity.
	straight-forward tax system analysis.
	horizontal equity.
	tax inequity.

Question 5 (10 points)

Under the current federal individual income tax law, which of the following would be an exclusion?

Question 5 options:

	Interest received on state and local government debt.
	All the above are exclusions.
	The value of an old car you received in exchange for painting a house.
	Wages paid by a for profit organization, like Raytheon.

Question 6 (10 points)

The following statements about Value Added Tax (VAT) are true except:

Question 6 options:

	Businesses of all types must register as VAT collectors to get VAT credits.
	VAT ultimately excludes businesses from taxation.
	VAT is a single stage tax.
	VAT is an alternate mechanism for taxing consumption.

Question 7 (10 points)

Fractional assessment refers to:

Question 7 options:

	the balance of corporate profits across state jurisdictions.
	the practice states use to divide formula funding among cities.
	Assessment models used in the oil fracking industry.
	assessing properties at less than market value for tax purposes.

Question 8 (10 points)

In the logic of consumption taxation, business purchases are exempt in retail sales taxation. Which of the following is a reason for that exemption?

Question 8 options:

	Taxes should normally avoid distorting business decisions.
	The tax is designed to place a uniform rate on household consumption expenditures.
	Taxes ought not discourage economic development.
	All are reasons for the exemption.

Question 9 (10 points)

Circuit breakers may be generally preferable to exemptions as a means of property tax relief because:

Question 9 options:

	they require annual reauthorization and thus allow greater control.
	they link property and sales taxes so as to be paid as one tax.
	they place costs directly on local governments, which is illegal.
	they are targeted.

Question 10 (10 points)

Multistage sales taxes levied at a fixed rate on the gross receipts of transactions at each stage of production are called:

Question 10 options:

	Intermediate value-added taxes.
	turnover taxes.
	Gross excise taxes.
	Lone buyer general consumption taxes.

Question 11 (10 points)

Exemption of food purchases from a sales tax reduces regressivity because:

Question 11 options:

	total food purchases never change.
	The total amount spent on food is always equal to amounts spent for other goods and services.
	the percent of income spent on food generally falls as family income is higher.
	low income families eat more than do high income families.

Question 12 (10 points)

A License Tax

Question 12 options:

	does not need to be distinguished from a franchise fee.
	Not necessarily a condition for operation.
	Is a fee
	Is established with no requirements for regulating specific activities.

Question 13 (10 points)

Assessed value is defined as

Question 13 options:

	Property with economic value owned by an entity.
	The value placed on property, usually by a government employee, for the purpose of distributing property tax burden. That value may or may not be directly related to market value.
	The maximum debt a government unit may incur under constitutional, statutory, or charter requirements, either in total or as a percentage of assessed value. Limits typically encompass only full-faith and-credit debt.
	The number of times by which earnings of a revenue bond financed project exceed debt service payable in a period. It gauges the margin of safety offered the bondholder.

Question 14 (10 points)

City X reassesses a portion of the property within its borders every year, on a rotating basis. This method of updating the assessment roll is referred to as:

Question 14 options:

	segmental assessment
	periodic assessment
	proportional assessment
	annual assessment

Question 15 (10 points)

The conventional real property tax is a levy on

Question 15 options:

	the property parcel, including both the land and structures built on that land.
	personal items purchased at retail outlets.
	undocumented future values.
	tangible items like refrigerators.

Question 16 (10 points)

Which of the following constitute a property tax relief measure?

Question 16 options:

	circuit breakers
	deferrals
	all of the above constitute property tax relief measures
	exemptions

Question 17 (10 points)

Which of the following is an accurate statement about state lotteries?

Question 17 options:

	Earmarking of lottery proceeds for specific purposes, i.e., for primary and secondary education, has not always increased state spending for those purposes.
	Because of broad participation rates through all income classes, the burden of the lottery is equivalent to that of a proportional tax.
	Because of individual demand for gambling, lottery proceeds are stable from year to year and easily predictable.
	Compared to other sources of state revenue, the cost of raising revenue from a lottery is only based n the winning ticket.

Question 18 (10 points)

A tax levied on a business may:

Question 18 options:

	increase the prices paid by consumers.
	result in any or all of the above actions depending upon the market conditions the firm faces.
	reduce the wages of workers.
	reduce the profits of owners.

Question 19 (10 points)

Which of the following is a logical reason for a state to implement a lottery as a way to increase state revenue?

Question 19 options:

	Lottery funds usually bring in a major share of the state’s total revenue.
	Lotteries have no administrative costs because private vendors sell all the tickets.
	Lottery revenue provides a stable source of funds that can be used as the fiscal base for important social programs.
	Lotteries are a way for the state to receive money from its citizens without levying a tax.

Question 20 (10 points)

The federal government may levy an individual income tax without the need to apportion among states because:

Question 20 options:

	individual income taxes are subject to the requirement that they be uniform and unchanged across states.
	Federal income taxes must be filed twice per year.
	the sixteenth amendment allows such taxes without apportionment.
	the U.S. Supreme Court has ruled that the individual income tax is not legal.

Question 21 (10 points)

For a taxpayer passive tax, the total collection costs of the tax:

Question 21 options:

	will be zero if the taxpayer is fully passive.
	will include substantial cost for non-governmental representatives of the taxpayer.
	will include an entirely administrative cost.
	Cannot be computed.

Question 22 (10 points)

A common criticism of retail sales and excise taxes is:

Question 22 options:

	they are progressive and only implemented during the holiday season.
	they are prohibited taxes with no allowed exemptions.
	they are regressive with respect to income.
	they only apply to certain individuals.

Question 23 (10 points)

Of the various government levels, ________ currently make(s) greatest use of user charges in the United States. 

Question 23 options:

	the federal government
	All jurisdictions are required by legislation to equally make use of user charges
	There are no services that can be delivered using a user charge system.
	cities

Question 24 (10 points)

Assume that the production chain for an economy is characterized by the following transactions:

Business           Purchases         Sales

Mine                 $0                      $200

Steel Mill          $200                 $1,000

Car Maker         $1,000              $5,000

Car Dealer         $5,000              $11,000

Assume further that the only transaction where a non-business is involved is in the sales of cars from car dealers to individuals.

If the steel mill is subject to a 20 percent value-added tax (VAT), how much would it pay in taxes prior to taking the credit?

Question 24 options:

	$40
	$160
	$380
	$400

Question 25 (10 points)

A state applies a 7 percent sales tax to consumer purchases of many items. These are data for a typical family:

Annual Income                       $60,000

Family Size                              2

Purchases of taxed items      $30,000

What average effective tax rate does the family pay?

Question 25 options:

	3.5%
	Cannot be computed from this information
	7%
	5%

Question 26 (10 points)

In a traditional mass cyclical assessment system, which of the following occurs?

Question 26 options:

	The value for a property parcel is adjusted each time the parcel is sold.
	The value of all properties in the assessment jurisdiction will be realigned annually via the internet and according to estimated changes in the value of types of properties.
	All properties in a jurisdiction are assessed in a single year and assessments do not change until the next reassessment year some years ahead.
	Tax rates are frozen when property values change.

Question 27 (10 points)

Which of the following is not an advantage of income taxation?

Question 27 options:

	Income taxes yield substantial amount of revenue.
	Income taxation remains constant when the economy contracts.
	Income is a reasonable measure of individual capacity to bear the cost of government.
	The U.S. income tax can be made to account for individual taxpayer conditions.

Question 28 (10 points)

Tax credits, exemption, and exclusions all can be used by governments to reduce taxes. Consider a credit of $5,000, an exemption of $5,000, and an exclusion of $5,000—all to be added to the existing federal individual income tax. Which of the following statements is correct?

Question 28 options:

	All tax reducing impacts are the same.
	The credit will cause greater revenue loss to the government, because it takes effect after the application of the rate schedule and directly reduces tax liability.
	The personal exemption would save the individual taxpayer the most money because it would have the greatest relative increase over existing exemption levels (currently approximately $2,000).
	The revenue lost by the U.S. Treasury would be greatest for the exclusion, because they are illegal.

Question 29 (10 points)

A taxpayer (individual) may legally avoid paying federal income tax by:

Question 29 options:

	not filing annual income taxes.
	collecting income from non-labor sources (stock dividends, bank interest, etc.)
	None of the above
	working for a for profit organization.

Question 30 (10 points)

User charges link funds produced to particular public services—individuals pay only for the services they actually use. Why doesn’t all government funding come from such freewill transactions and market exchange?

Question 30 options:

	All services are produced and delivered using private sector economic models.
	Some services may intentionally subsidize low-income or otherwise disadvantaged recipients.
	Activities that have substantial benefits extending beyond the principle recipient are candidates for user charges.
	There are no services that can be delivered using a user charge system.