WGU C237 Taxation 1 Exam 340 Questions with
Verified Answers
a payment required by a government that is unrelated to any specific benefit or
service received from the government
3 Criteria
Payment must be
*Required (not INVOLUNTARY)
*Imposed by a government agency (federal, state, local)
*Not tied directly to the benefit received by the taxpayer
- Continuous debate whom to tax, what to tax, how much to tax - CORRECT
ANSWER Tax. (CHAPTER 1)
taxes imposed on the purchase of goods -e.g., alcohol, tobacco products - that are
considered socially less desirable. - CORRECT ANSWER Sin Tax
tax that is assessed for a specific purpose (e.g. education) - CORRECT ANSWER
Earmarked tax
Tax = Tax Base x Tax Rate
,Tax Base - the item that is being taxed (e.g., purchase price of a good, taxable
income, fair market value for a property, etc.).
Tax Rate - level of taxes imposed on the tax base and is usually expressed as a
percentage - CORRECT ANSWER simple tax formula
Flat tax (aka proportional tax) - A single tax rate applied through the tax base -
Same rate for all taxpayers regardless of their income (sales tax)
Graduated tax 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 lower) percentage rate. (e.g. income tax) - CORRECT ANSWER
Flat tax vs Graduated tax
Marginal average
Average
effective
Types of taxes
proportional, progressive, regressive - CORRECT ANSWER Tax Rate structures
the tax rate that applies to the next additional increment of a taxpayer's taxable
income (or deductions). (FORMULA Pictured)
,"Old" = current tax
"New" = revised tax after incorporating additional income (or deductions)
used for income tax
it's a graduated tax rate - CORRECT ANSWER Marginal Tax Rate (MTR)
represents a taxpayer's average level of taxation on each dollar of taxable income
(used to determine what percent of taxable income earned is paid in tax)
ATR = Total tax/ Taxable income - CORRECT ANSWER Average Tax Rate (ATR)
the taxpayer's average rate of taxation on each dollar of total income (both
taxable and non-taxable)
*Measures tax payer's ability to pay taxes - higher nondeductible = or less than
the ATR
ETR = Total tax/
total economic income - CORRECT ANSWER Effective Tax Rate (ETR)
Also known as a flat tax, imposes a constant tax rate throughout the tax base.
Ex. property, franchise, sales, unified transfer tax system (estate), customs, excise -
CORRECT ANSWER Proportional tax rate
, imposes an increasing marginal tax rate as the tax base increases
eg. federal/state income taxes or gift tax - as income increases the rate also
increases
Average tax rate < or = to Marginal rate - CORRECT ANSWER Progressive tax rate
decreasing marginal tax rate as tax base increases.
eg. Social Security tax (FICA) and federal and state unemployment taxes
(sales tax is regressive in terms of effective rate. - the more you make, the less you
pay in tax) - CORRECT ANSWER Regressive tax rate
A tax imposed on the producer of goods (and services) based on the value added
to the goods (services) at each stage of production. Value-added taxes are
common in Europe (type of sales tax) - CORRECT ANSWER Value-added tax (VAT)
a tax in which the tax base is income. income taxes are imposted by the federal
government and by most states (most significant U.S. tax- 47.3% of all taxes
collected in 2016)
First income tax: 1861 to fund Civil War - expired in 1872
Verified Answers
a payment required by a government that is unrelated to any specific benefit or
service received from the government
3 Criteria
Payment must be
*Required (not INVOLUNTARY)
*Imposed by a government agency (federal, state, local)
*Not tied directly to the benefit received by the taxpayer
- Continuous debate whom to tax, what to tax, how much to tax - CORRECT
ANSWER Tax. (CHAPTER 1)
taxes imposed on the purchase of goods -e.g., alcohol, tobacco products - that are
considered socially less desirable. - CORRECT ANSWER Sin Tax
tax that is assessed for a specific purpose (e.g. education) - CORRECT ANSWER
Earmarked tax
Tax = Tax Base x Tax Rate
,Tax Base - the item that is being taxed (e.g., purchase price of a good, taxable
income, fair market value for a property, etc.).
Tax Rate - level of taxes imposed on the tax base and is usually expressed as a
percentage - CORRECT ANSWER simple tax formula
Flat tax (aka proportional tax) - A single tax rate applied through the tax base -
Same rate for all taxpayers regardless of their income (sales tax)
Graduated tax 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 lower) percentage rate. (e.g. income tax) - CORRECT ANSWER
Flat tax vs Graduated tax
Marginal average
Average
effective
Types of taxes
proportional, progressive, regressive - CORRECT ANSWER Tax Rate structures
the tax rate that applies to the next additional increment of a taxpayer's taxable
income (or deductions). (FORMULA Pictured)
,"Old" = current tax
"New" = revised tax after incorporating additional income (or deductions)
used for income tax
it's a graduated tax rate - CORRECT ANSWER Marginal Tax Rate (MTR)
represents a taxpayer's average level of taxation on each dollar of taxable income
(used to determine what percent of taxable income earned is paid in tax)
ATR = Total tax/ Taxable income - CORRECT ANSWER Average Tax Rate (ATR)
the taxpayer's average rate of taxation on each dollar of total income (both
taxable and non-taxable)
*Measures tax payer's ability to pay taxes - higher nondeductible = or less than
the ATR
ETR = Total tax/
total economic income - CORRECT ANSWER Effective Tax Rate (ETR)
Also known as a flat tax, imposes a constant tax rate throughout the tax base.
Ex. property, franchise, sales, unified transfer tax system (estate), customs, excise -
CORRECT ANSWER Proportional tax rate
, imposes an increasing marginal tax rate as the tax base increases
eg. federal/state income taxes or gift tax - as income increases the rate also
increases
Average tax rate < or = to Marginal rate - CORRECT ANSWER Progressive tax rate
decreasing marginal tax rate as tax base increases.
eg. Social Security tax (FICA) and federal and state unemployment taxes
(sales tax is regressive in terms of effective rate. - the more you make, the less you
pay in tax) - CORRECT ANSWER Regressive tax rate
A tax imposed on the producer of goods (and services) based on the value added
to the goods (services) at each stage of production. Value-added taxes are
common in Europe (type of sales tax) - CORRECT ANSWER Value-added tax (VAT)
a tax in which the tax base is income. income taxes are imposted by the federal
government and by most states (most significant U.S. tax- 47.3% of all taxes
collected in 2016)
First income tax: 1861 to fund Civil War - expired in 1872
