(: TAX 430 EXAM 1 - Complete Study Guide and Practice Test Review).
what is a tax a payment required by a government that is unrelated
to any specific benefit or service received from the
government
what is the general purpose of a tax? to raise revenues for the government
what is the difference between a tax a tax is not intended to punish or prevent illegal
and fines and fees? behavior
what are the 3 key components to a 1. required
tax? 2. not tied directly to the benefit received by the
taxpayer
3. imposed by a government agency
what is an earmarked tax? a tax assessed for a specific purpose ex: education
what is the tax formula? tax = tax base x tax rate
what is a tax base? defines what is taxed and is usually expressed in
monetary terms
what is a flat tax? a tax in which a single tax rate is applied throughout
the tax base
what are graduated taxes? taxes in which the tax base is divided into a series of
monetary amounts, or brackets, where each
successive bracket is taxed at a different (gradually
higher or gradually lower) percentage rate.
what is the marginal tax rate equation? (new total tax - old total tax)/ (new taxable income -
old taxable income)
average tax rate equation total tax/taxable income
effective tax rate equation total tax/total income
proportional tax rate structure also known as a flat tax, imposes a constant tax rate
throughout the tax base. as the tax base increases, the
taxes paid increase proportionally
progressive tax rate structure imposes an increasing marginal rate as the tax base
increases
3/7/2026, 6:26:28 PM
, (: TAX 430 EXAM 1 - Complete Study Guide and Practice Test Review).
regressive tax rate structure imposes a decreasing marginal tax rate as the tax
base increases
sufficiency assessing the amount of tax revenues in must
generate and ensuring it provides them.
static forecasting ignores how taxpayers may alter their activities in
response to a tax change.
dynamic forecasting incorporates into the forecast the changes a taxpayer
may make in response to a tax change.
income effect the idea that when people are taxed more, they will
work harder to generate the same after tax dollars
substituion effect when people are taxed more, rather than working
more, they will substitute nontaxable activities
equity a tax system is considered fair or equitable if the tax
is based on the taxpayers ability to pay. taxpayers
with a greater ability to pay, pay more tax
horizontal equity two taxpayers in similar situations pay the same tax
vertical equity taxpayers with greater ability to pay tax, pay more
tax than those with a lesser ability to pay more tax
certainity tax payers should be able to determine when, where
and how much to determine the tax
convience suggests that a taxsystem should be designed to
faciliate the collection of tax revenues without undue
hardship on the taxpayer or the government
economy a good tax system should minimize the compliance
and administration costs associated with the tax
system.
what determines whether a tax return gross income
is required?
statue of limitations defines the period in which the taxpayer can file an
amended tax return or the IRS can assess a tax
deficiency for a specific year.
what is the statue of limitations three years from the later of the date of (1) the date
actually filed or (2) the returns original due date
3/7/2026, 6:26:28 PM
what is a tax a payment required by a government that is unrelated
to any specific benefit or service received from the
government
what is the general purpose of a tax? to raise revenues for the government
what is the difference between a tax a tax is not intended to punish or prevent illegal
and fines and fees? behavior
what are the 3 key components to a 1. required
tax? 2. not tied directly to the benefit received by the
taxpayer
3. imposed by a government agency
what is an earmarked tax? a tax assessed for a specific purpose ex: education
what is the tax formula? tax = tax base x tax rate
what is a tax base? defines what is taxed and is usually expressed in
monetary terms
what is a flat tax? a tax in which a single tax rate is applied throughout
the tax base
what are graduated taxes? taxes in which the tax base is divided into a series of
monetary amounts, or brackets, where each
successive bracket is taxed at a different (gradually
higher or gradually lower) percentage rate.
what is the marginal tax rate equation? (new total tax - old total tax)/ (new taxable income -
old taxable income)
average tax rate equation total tax/taxable income
effective tax rate equation total tax/total income
proportional tax rate structure also known as a flat tax, imposes a constant tax rate
throughout the tax base. as the tax base increases, the
taxes paid increase proportionally
progressive tax rate structure imposes an increasing marginal rate as the tax base
increases
3/7/2026, 6:26:28 PM
, (: TAX 430 EXAM 1 - Complete Study Guide and Practice Test Review).
regressive tax rate structure imposes a decreasing marginal tax rate as the tax
base increases
sufficiency assessing the amount of tax revenues in must
generate and ensuring it provides them.
static forecasting ignores how taxpayers may alter their activities in
response to a tax change.
dynamic forecasting incorporates into the forecast the changes a taxpayer
may make in response to a tax change.
income effect the idea that when people are taxed more, they will
work harder to generate the same after tax dollars
substituion effect when people are taxed more, rather than working
more, they will substitute nontaxable activities
equity a tax system is considered fair or equitable if the tax
is based on the taxpayers ability to pay. taxpayers
with a greater ability to pay, pay more tax
horizontal equity two taxpayers in similar situations pay the same tax
vertical equity taxpayers with greater ability to pay tax, pay more
tax than those with a lesser ability to pay more tax
certainity tax payers should be able to determine when, where
and how much to determine the tax
convience suggests that a taxsystem should be designed to
faciliate the collection of tax revenues without undue
hardship on the taxpayer or the government
economy a good tax system should minimize the compliance
and administration costs associated with the tax
system.
what determines whether a tax return gross income
is required?
statue of limitations defines the period in which the taxpayer can file an
amended tax return or the IRS can assess a tax
deficiency for a specific year.
what is the statue of limitations three years from the later of the date of (1) the date
actually filed or (2) the returns original due date
3/7/2026, 6:26:28 PM
