Chapter 1

Question 1

Taxes levied on the retail sale of particular products

Answer 1

excise taxes

Question 2

Taxes directly imposed by a government and easily quantified

Answer 2

explicit taxes

Question 3

A single tax applied to an entire base

Answer 3

flat tax

Question 4

Taxes based on the fair market values of wealth transferred by gift

Answer 4

gift tax

Question 5

Tax applied by dividing a tax base into a series of monetary amounts (brackets) and each successive bracket is taxed at a different percentage rate

Answer 5

graduated taxes

Question 6

Means that two taxpayers in similar situations pay the same tax

Answer 6

horizontal equity

Question 7

Indirect taxes– not paid directly to the government. They result from government grants to certain transactions to satisfy social, economic, or other objectives.

Answer 7

implicit taxes

Question 8

Predicts that when taxpayers are taxed more, they will work harder to generate the same after tax dollars.

Answer 8

income effect

Question 9

The most significant tax assessed on an individual (represents 49.8% of all tax revenue collected in 2018).

Answer 9

income tax

Question 10

Taxes used to fund local government activities (e.g. income, sales and use, excise and property taxes). Largest % individual income and state sales taxes

Answer 10

local tax

Question 11

The tax rate that applies to the next additional increment of a taxpayer’s taxable income.
MTR=New Total Tax-Old Total Tax/ New taxable income- Old taxable income

Answer 11

marginal tax rate

Question 12

Pays for medical insurance for individuals who are elderly or disabled

Answer 12

medicare tax

Question 13

An ad valorem tax. The tax base for each is the fair market value of the property, and both are generally collected annually (when imposed). All property that is not real property, both tangible and intangible.

Answer 13

personal property tax

Question 14

An ad valorem tax. he tax base for each is the fair market value of the property, and both are generally collected annually (when imposed). Related to land, structures and improvements permanently attached to land.

Answer 14

real property tax

Question 15

Imposes a decreasing marginal tax rate as the tax base increases (Social security and federal and state unemployment taxes)

Answer 15

regressive tax rate structure

Question 16

The tax on the retail price of goods and some services.

Answer 16

sales tax

Question 17

Se;f employed individuals pay the full 12.4 % SS and 2.9% Medicare tax from their wages or salary– these are split between employer and employee usually.

Answer 17

self-employment tax

Question 18

Taxes that discourage other legal activity (i.e.impose relatively high surcharges on alcohol and tobacco products).

Answer 18

sin taxes

Question 19

Pay the monthly retirement, survivor and disability benefits for qualifying individuals

Answer 19

Social Security tax

Question 20

Taxes used to fund state government activities (e.g. income, sales and use, excise and property taxes). Largest % individual income and state sales taxes

Answer 20

state tax

Question 21

Forecasting tax revenues based on the existing state of transactions, that doesn’t account for how taxpayers may alter their activities in response to a tax law change

Answer 21

static forecasting

Question 22

Predicts that when taxpayers are taxed more, rather than work more, they will substitute nontaxable activities like leisure pursuits for taxable ones because the marginal value of taxable activities has decreased.

Answer 22

substitution effect

Question 23

A tax system that generates enough tax revenue

Answer 23

sufficiency

Question 24

A payment required by a government that is unrelated to any specific benefit or service received by the government. Main purpose to fund the operations of the government (i.e. raise revenue)

Answer 24

tax

Question 25

What is actually taxed (expressed in monetary terms). Examples: taxable income, purchases, real estate values, personal property values.

Answer 25

tax base

Question 26

The level of taxes imposed on a tax base (expressed as a percentage)

Answer 26

tax rate

Question 27

Taxes imposed by the federal government on estates and gifts. Based on the fair market values of wealth being transferred. Max gift tax rate is 40%.

Answer 27

transfer taxes

Question 28

Taxes that fund temporary unemployment benefits for individuals terminated from their job without cause.

Answer 28

unemployment taxes

Question 29

Taxes on the retail price of goods owned,possessed or consumed within a state that were not purchased within the state. Used to discourage taxpayers from buying goods outside the state to avoid or minimize the sales tax in their home state.

Answer 29

use tax

Question 30

Imposed on producers of goods and services based on the value added to goods and services at each stage of production (common in Europe)

Answer 30

value-added tax

Question 31

Achieved when taxpayers with greater ability to pay taxes pay more taxes than taxpayers with less ability to pay.

Answer 31

vertical equity

Question 32

A taxpayer’s average level of taxation on each dollar of taxable income= Total tax/ taxable income

Answer 32

Average tax

Question 33

A taxpayer’s average rate of taxation on each dollar of total income, including taxable and nontaxable income.

Answer 33

Effective tax rate

Question 34

Imposes a constant tax rate throughout the tax base (i.e. sales tax)

Answer 34

Proportional tax rate structure (flat tax)

Question 35

Imposes an increasing marginal tax rate as the tax base increases (i.e. federal and state income tax)

Answer 35

Progressive tax rate structure