FEDERAL INCOME TAX EXAM 1 REVIEW EXAM QUESTIONS AND ANSWERS

FEDERAL INCOME TAX EXAM 1 REVIEW EXAM QUESTIONS
AND ANSWERS
tax - CORRECT ANSWER✅✅a payment required by a government that is unrelated to any specific
benefit or service received from the government



Key components of a tax - CORRECT ANSWER✅✅1. Payment required.



2. Payment imposed by government agency (federal, state, local).



3. Payment not tied directly to benefit received by the taxpayer.



Different Ways to Measure Tax Rates - CORRECT ANSWER✅✅Marginal Tax Rate

Average Tax Rate

Effective Tax Rate



Marginal Tax Rate - CORRECT ANSWER✅✅the tax rate that applies to the next additional increment of
a taxpayer's taxable income



Average Tax Rate - CORRECT ANSWER✅✅the taxpayer's average level of taxation on each dollar of
taxable income



Effective Tax Rate - CORRECT ANSWER✅✅the taxpayer's average rate of taxation on each dollar of total
income (both taxable and nontaxable)



Proportional Tax Rate (Flat Tax) - CORRECT ANSWER✅✅imposes a constant tax rate throughout the tax
base



Progressive Tax Rate - CORRECT ANSWER✅✅limposes an increasing marginal tax rate as the tax base
increases.