Test-Bank-for-Essentials-of-Federal-Taxation-1st-Edition-by-Spilker
Chapter 01
An Introduction to Tax
True / False Questions
1. Taxes influence many types of business decisions but generally do not influence
personal decisions.
True False
2. Taxes influence business decisions such as where a business should locate or how a
business should be structured.
True False
3. Tax policy rarely plays an important part in presidential campaigns.
True False
4. Margaret recently received a parking ticket. This is a common example of a local tax.
True False
5. George recently paid $50 to renew his driver's license. The $50 payment is considered
a tax.
True False
6. 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
7. One key characteristic of a tax is that it is a required payment to a governmental
agency.
True False
8. Common examples of sin taxes include the taxes imposed on airline tickets and
gasoline.
True False
9. 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
,Test-Bank-for-Essentials-of-Federal-Taxation-1st-Edition-by-Spilker
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
,Test-Bank-for-Essentials-of-Federal-Taxation-1st-Edition-by-Spilker
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
, Test-Bank-for-Essentials-of-Federal-Taxation-1st-Edition-by-Spilker
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 way the federal income tax system addresses the
"certainty" criterion in evaluating tax systems.
True False
38. In considering the "economy" criterion in evaluating tax systems, one must consider
this criterion from both the taxpayer and the government's perspective
True False
Multiple Choice Questions
39. Taxes influence which of the following decisions?
A. business
decisions
B. personal
decisions
C. political
decisions
D. investment
decisions
E. All of the
above
Chapter 01
An Introduction to Tax
True / False Questions
1. Taxes influence many types of business decisions but generally do not influence
personal decisions.
True False
2. Taxes influence business decisions such as where a business should locate or how a
business should be structured.
True False
3. Tax policy rarely plays an important part in presidential campaigns.
True False
4. Margaret recently received a parking ticket. This is a common example of a local tax.
True False
5. George recently paid $50 to renew his driver's license. The $50 payment is considered
a tax.
True False
6. 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
7. One key characteristic of a tax is that it is a required payment to a governmental
agency.
True False
8. Common examples of sin taxes include the taxes imposed on airline tickets and
gasoline.
True False
9. 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
,Test-Bank-for-Essentials-of-Federal-Taxation-1st-Edition-by-Spilker
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
,Test-Bank-for-Essentials-of-Federal-Taxation-1st-Edition-by-Spilker
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
, Test-Bank-for-Essentials-of-Federal-Taxation-1st-Edition-by-Spilker
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 way the federal income tax system addresses the
"certainty" criterion in evaluating tax systems.
True False
38. In considering the "economy" criterion in evaluating tax systems, one must consider
this criterion from both the taxpayer and the government's perspective
True False
Multiple Choice Questions
39. Taxes influence which of the following decisions?
A. business
decisions
B. personal
decisions
C. political
decisions
D. investment
decisions
E. All of the
above
