56. The many loopholes present in the federal income tax system prior to the 1986 tax reform caused all of
the following except
57. Exemptions and deductions included in the tax laws
A. Are designed to encourage specific economic activities.
homes.
58. Vertical equity can be determined by comparing the
59. The taxation principle that says people with higher incomes should pay more in taxes than those with lower
incomes is called
A. A flat tax system.
60. As exemptions are raised and allowable deductions are increased, there is
61. A tax that is designed to be progressive will
improve A. Efficiency.
62. If an accountant makes $80,000 and after deductions pays $8,000 in taxes while an administrative assistant
makes $35,000 and after deductions pays $2,000 in taxes, this is an example of
63. The taxation principle that says people with equal incomes should pay equal taxes is called
A. Horizontal equity.
When two individuals of similar incomes pay similar amounts of taxes, there is horizontal equity.
64. Horizontal equity can be determined by comparing the
65. To determine horizontal equity, two taxpayers with
66. If Luis makes $50,000 per year as a computer programmer and pays $6,000 in taxes while Hector makes
$50,000 per year as a roofing contractor and pays $7,000 in taxes, this is an example of
A. A regressive tax system.
67. If Alejandra makes $46,000 per year as a nurse and pays $7,000 in taxes while Emily makes $46,000 per
year as a high school teacher and pays $6,500 in taxes, this is an example of
A. Horizontal inequity.
68. The nominal tax rate is
69. Taxes paid divided by total income is the
70. The effective tax rate is
A. Equal to the taxes paid divided by taxable income.
71. If a tax system has no deductions, exemptions, or other loopholes, then the effective tax rate will
72. An economy with nominal tax rates significantly higher than effective tax rates has
A. Loopholes in the tax code.
73. Suppose a taxpayer has an income of $120,000 and a taxable income of $80,000, and pays $20,000 in taxes. If
the taxpayer says she is taxed at a 25 percent tax rate, she is referring to the
A. Nominal tax rate.
74. Suppose a taxpayer has an income of $70,000 and a taxable income of $60,000, and pays $9,000 in taxes. If
the taxpayer says she is taxed at a 15 percent tax rate, she is referring to the
A. Marginal tax rate.
75. Suppose a taxpayer has an income of $90,000 and a taxable income of $75,000, and pays $7,500 in taxes. If
the taxpayer says he is taxed at a 10 percent tax rate, he is referring to the
A. Vertical tax rate.
76. Suppose a taxpayer has an income of $50,000 and a taxable income of $45,000, and pays $5,000 in taxes. If
the taxpayer talks of being taxed at a 10 percent tax rate, she is referring to the
77. Suppose a taxpayer has an income of $100,000 and a taxable income of $80,000, and pays taxes of $10,000.
If the taxpayer talks of being taxed at a 10 percent rate, she is referring to the
78. Suppose Mr. Lee has total income of $120,000, has taxable income of $90,000, and pays $30,000 in
taxes. Considering the information, what is Mr. Lee’s nominal tax rate?
A. 25 percent.
79. Suppose Mr. Lee has total income of $120,000, has taxable income of $90,000, and pays $30,000 in
taxes. Considering the information, what is Mr. Lee’s effective tax rate?
80. Suppose Ms. Sanchez has a total income of $200,000, has a taxable income of $120,000, and pays $40,000 in
taxes. Considering the information, what is Ms. Sanchez’s nominal tax rate?
81. Suppose Ms. Sanchez has a total income of $200,000, has a taxable income of $120,000, and pays $40,000 in
taxes. Considering the information, what is Ms. Sanchez’s effective tax rate?
82.
Compute the tax rates for the three taxpayers shown in Table 33.1. Then use the table to answer the indicated
question.
In Table 33.1, the effective tax rate for taxpayer 1 is
83.
Compute the tax rates for the three taxpayers shown in Table 33.1. Then use the table to answer the indicated
question.
In Table 33.1, the nominal tax rate for taxpayer 2 is
84.
Compute the tax rates for the three taxpayers shown in Table 33.1. Then use the table to answer the indicated
question.
In Table 32.1, the effective tax rate for taxpayer 3 is
85.
Compute the tax rates for the three taxpayers shown in Table 33.1. Then use the table to answer the indicated
question.
In Table 33.1, the nominal tax rate for taxpayer 3 is
86. An increase in deductions, exemptions, and credits in the tax code will
A. Reduce the tax base.
87. Which of the following was a basic feature of the Tax Reform Act of 1986?
A. A shift from corporate to personal taxes.
88. The changes contained in the Tax Reform Act (TRA) of 1986
89. The changes contained in the 1990 and 1993 tax increases
90. The Bush tax cuts of 2001-2010 reduced
A. The top marginal tax rate from 39.6 percent to 35 percent.
91. The Bush tax cuts of 2001-2010 contained incentives for
92. The Bush tax cuts of 2001-2010 increased education incentives, and as a result,
A. New vertical inequities were introduced into the tax system.
93. A tax system in which tax rates fall as incomes rise is
A. Regressive.
94. In general, state and local taxes are
95. State and local governments generate most of their revenues through
96. A 7.25 percent sales tax
A. Is a proportional tax because the rate is the same for all income groups.
97. Tax incidence most accurately refers to
98. The fact that landlords are able to pass the majority, but not all, of the burden of property taxes on to renters
suggests that the price elasticity of demand for apartments
99. A payroll tax
A. Shifts the labor supply curve to the right.
100. Which of the following is a payroll tax?
A. The Social Security tax.
101. Which of the following is true about a payroll tax?
102. The imposition of a payroll tax
A. Reduces the nominal cost of labor.
103. The marginal revenue product (MRP) establishes
104. The U.S. tax system as a whole is basically
105. Which of the following is an example of an explicit income transfer?
A. The check received by a person currently employed by the postal service.
106. Which of the following is an example of an indirect income transfer?
107. Government failure
108. Since the current tax system is fairly ineffective at redistributing income, some people think this indicates
109. The argument against greater equality in the distribution of income in the United States hinges basically on
A. Loss of incentives.
110. Greater equality in income is supported by the argument that it
111. A flat tax
112. A flat tax
113. A flat tax is
114. With a flat tax,
A. Vertical inequities cannot occur.
115. Flat tax critics