USE THE FOLLOWING TAX RATE SCHEDULE TO ANSWER THE NEXT SIX QUESTIONS.
If taxable income is:
|
Over
|
But not over-
|
Tax is:
|
of the amount over
|
|
$0
|
$2,300
|
-0-
|
$2,300
|
|
2,300
|
3,400
|
-11%
|
2,300
|
|
3,400
|
4,400
|
$121+12%
|
3,400
|
|
4,400
|
6,500
|
241+14%
|
4,400
|
|
6,500
|
8,500
|
535+15%
|
6,500
|
|
8,500
|
10,800
|
835+16%
|
8,500
|
|
10,800
|
12,900
|
1,203+18%
|
10,800
|
|
12,900
|
15,000
|
1,581+20%
|
12,900
|
|
15,000
|
18,200
|
2,001+23%
|
15,000
|
|
18,200
|
23,500
|
2,737+26%
|
18,200
|
|
23,500
|
28,800
|
4,115+30%
|
23,500
|
|
28,800
|
34,100
|
X+34%
|
28,800
|
|
34,100
|
41,500
|
7,507+38%
|
34,100
|
|
41,500
|
55,300
|
10,319+42%
|
41,500
|
|
55,300
|
81,800
|
16,115+48%
|
55,300
|
|
81,800
|
-------
|
28,835+50%
|
81,800
|
1. Mr. Smith has adjusted gross income $26,000 and taxable income of $15,200. What is Mr. Smith's marginal t(L'(rate (to the nearest tenth of a percent)?
a. 7.9%
b. 13.5%
c. 23.0%
d. 30.0%
2. The average tax rate Mr. Smith pays equals (to the nearest tenth of a percent):
a. 7.9%
b. 13.5%
c. 23.0%
d. 30.0%
3. The average effective tax rate Mr. Smith pays equals (to the nearest tenth of a percent):
a. 7.9%
b. 8.2%
c. 13.5%
d. 23.0%
4. An additional personal deduction of $200 would reduce Mr. Smith's tax liability by:
a. 200
b. 40
c. 46
d. 16
5. A tax credit of $100 would reduce Mr. Smith's tax liability by:
a. 100
b. 30
c. 23
d. 8
6. What is the value of X in the tax table?
a. 5705
b. 5811
c. 5917
d. None of the above or cannot be calculated.
7. Indexation of individual income taxes is designed to prevent:
a. bracket creep.
b. the Laffer affect.
c. horizontal inequities.
d. regressivity.
8. Tax credits, exemption, and exclusions all can be used by governments to reduce taxes.
Consider a credit of $5,000, an exemption of $5,000, and an exclusion of $5,000-all to be added to the existing federal individual income tax. Which of the following statements is correct?
a. The revenue lost by the U.S. Treasury would be greatest for the exclusion, because such a provision removes transactions which would appear to be income from the tax base.
b. The personal exemption would save the individual taxpayer the most money because it would have the greatest relative increase over existing exemption levels (currently somewhat over $2,000).
c. The credit will cause greater revenue loss, because it takes effect after the application of the rate schedule and directly reduces tax liability.
d. All tax reducing impacts would be the same.
USE THE INFORMATION FOR THE NEXT TWO QUESTIONS.
A state applies a 7 percent sales tax to consumer purchases of many items. These are data for a typical family:
Annual Income $60,000
Family Size 2
Purchases of taxed items $30,000
9. What statutory rate does the family pay?
a. 5.0%
b. 3.5%
c. 7.0%
d. Cannot be computed £I on this information.
10. What average effective tax rate does the family pay?
a. 5.0%
b. 3.5%
c. 7.0%
d. Cannot be computed from this information
USE THE FOLLOWING INFORMATION TO ANSWER THE FOLLOWING FOUR QUESTIONS.
Assume that the production chain for an economy is characterized by the following transactions:
Business Purchases Sales
Mine $0 $ 200
Steel Mill $ 200 $1,000
Car Makei $1,000 $5,000
Car Dealer $5,000 $11,000
Assume further that the only transaction where a non-business is involved is in the sales of cars from car dealers to individuals.
11. If the mine is subject to a 10 percent value-added tax (VAT), how much would it pay in taxes?
a. $400
b. $20
c. $0
d. $380
12. If the car dealer is subject to a 10 percent retail sales tax (RST), how much would it pay in taxes?
a. $500
b. $1,100
c. $0
d. $600
13. If the car dealer is subject to a 10 percent VAT, how much would it pay in taxes?
a. $500
b. $1,100
c. $0
d. $600
14. How much more revenue does a 10 percent VAT collect as compared to a 10 percent RST?
a. $500
b. $1,100
c. $0
d. $600
15. Two cities are identical in all respects except City A has an assessment ratio of 100% and City B has an assessment ratio of25%. Both cities need to raise $1,000,000 in property tax revenues. The statutory tax rates on property are:
a. higher in City A than City B.
b. higher in City B than City A.
c. identical in both cities.
d. dependent on non-property tax revenues in each.
16. A residence in Sullivan County has gross assessed value of $15,000. Its owner qualifies for an old age exemption of $1,000 and a homestead exemption of $2,000. The property tax rate is $5.00 per $100 of assessed value. What will the property tax bill equal on this property?
a. $750
b. $700
c. $650
d. $600
USE THE FOLLOWING DATA TO ANSWER THE NEXT Two QUESTIONS.
Hicksville has a proposed budget of $7,000,000 for the fiscal year. The city has an assessed value of $100,000,000 and will receive state aid of $100 per capita based on its 2000 census population of 15,000. Assessed value equals 25% of market value.
17. What is the nominal tax rate in Hicksville?
a. 055
b. 070
c. .085
d. 220
18. What is the effective tax rate in Hicksville?
a. .01375
b. 01750
c. .05500
d. 07000
The Mundane County Council has the following information concerning the upcoming fiscal year's budget:
Planned Expenditure $ 22,550,000
Sales Tax Revenue 4,000,000
Total Market Value of Propelty 800,000,000
User Charge Revenue 3,250,000
Income T~'{Revenue 1,600,000
Miscellaneous Revenue 1,200,000
Assessment Ratio 50%
19. To balance the budget, the Council will set the property tax rate at:
a. $ 32.00/$100 AV
b. $16.00/$100 AV
c. $ 3.20/$100 AV
d. $ 1.60/$100 AV