ch 3 connect Flashcards
Taxes are voluntary payments paid to a government for a specific benefit received by the specific taxpayer.
false-involuntary
Jerry recently paid $20 in tolls for the Florida turnpike. The $20 payment is considered a tax.
false-this is a fine
The federal income tax is an example of a regressive tax system.
false-progressive
The marginal tax rate is often used in tax planning.
true
The gift tax is imposed on the fair market value of items transferred upon death.
false- based on wealth transfers
Horizontal equity means that two taxpayers with different amounts of income should pay different amounts of tax but fairly in relation to their ability to pay.
flase- this is vertical equity
is -1% local surcharge on hotel rooms to pay for city government.- a tax
yes
Which of the following is an example of a progressive tax system?
-individual income tax
why is learning taxes important
-affects individuals, businessess, politicians
aspects of business that require knowledge of taxation?
-where to locate businss
-what org form should the business use
-how the business should compensate its employees
aspects of personal finance that require knowledge of taxation?
-choosing investments,
-performing gift or estate planning
- saving for educational expenses
- evaluating job offers.
how do taxes affect the political process in the United States.
-presidential candidates distinguishing themselves based on tax rhetoric.
-Taxes also have an impact on the political process as voters will need a general understanding of taxes to evaluate and assess the merits of alternative tax proposals
Courtney recently received a speeding ticket on her way to the university. Her fine was $200. Is this considered a tax? Why or why not?
No bc taxes are intended to generate revenue for govt operations, & fines are designed to punish/prevent behaviors, such as breaking the law by speeding, as in Courtney’s case.
To help pay for the city’s new stadium, the city of Birmingham recently enacted a 1 percent surcharge on hotel rooms. Is this a tax? Why or why not?
yes-helps govt w their operations and not a benefit to hotel users
Marlon and Latoya recently started building a house. They had to pay $300 to the county government for a building permit. Is the $300 payment a tax? Why or why not?
no- they receive a benefit from this
As noted in Example 1-2, tolls, parking meter fees, and annual licensing fees are not considered taxes. Can you identify other fees that are similar?
-national park entrance fee
-public transportation fee
-dog registration
how might one use average tax rate
Taxpayers might use the average tax rate in budgeting tax expense as a portion of income.
how might taxpayer use effective tax rate
to provide a depiction of the taxpayer’s tax burden as it provides the taxpayer’s total tax paid as a ratio of the sum of taxable and nontaxable income.
how might taxpayer use marginal income
tax planning
Which is a more appropriate tax rate to use to compare taxpayers’ tax burdens—the average or the effective tax rate? Why?
effective tax rate
provides the taxpayer’s total tax paid as a ratio of the sum of both their taxable and nontaxable income.
how to find current marginal rate
(% tax braket they r currently in)
Song earns $112,000 taxable income and is taxed at an average rate of 20 percent ($22,400 of tax). Assuming that Congress increases the tax rate SO Song’s average tax rate increases from 20 to 25 %.
a. What will happen to the government’s tax revenues if Song chooses to spend more time pursuing her other passions besides work in response to the tax rate change and therefore earns only $84,000 in taxable income? AND WHAT IS THIS CALLED
What types of taxpayers are likely to respond in this manner?
Government’s tax revenues would decrease by $1,400
-substitution effect
-ones with more disposable income
Taxes influence personal decisions such as whether to buy or rent a house.
true
Sin taxes are:
taxes to discourage less desirable behavior.
