ch01 Student: 1. Taxes influence many types of business decisions but generally do not influence personal decisions. True False Taxes influence business decisions such as where a business should locate or how a business should be structured. True False Tax policy rarely plays an important part in presidential campaigns. True False Margaret recently received a parking ticket. This is a common example of a local tax. True False George recently paid $50 to renew his driver's license. The $50 payment is considered a tax. True False 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 One key characteristic of a tax is that it is a required payment to a governmental agency. True False Common examples of sin taxes include the taxes imposed on airline tickets and gasoline. True False 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 In addition to raising revenues, specific U.S. taxes may have other objectives (e.g., economic or social objectives). True False The two components of the tax calculation are the tax rate and the taxpayer. True False The tax base for the federal income tax is taxable income. True False A flat tax is an example of a graduated tax system. True False The main difficulty in calculating an income tax is determining the correct amount of the tax base. True False A taxpayer's average tax rate is the most appropriate tax rate to use in tax planning. True False The effective tax rate, in general, provides a better depiction of a taxpayer's tax burden than the average tax rate. True False 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16.
17. The effective tax rate expresses the taxpayer's total tax as a percentage of the taxpayer's taxable and nontaxable income. True False In a proportional (flat) tax rate system, the marginal tax rate will always equal the average tax rate. True False In a regressive tax rate system, the marginal tax rate will often be greater than the average tax rate. True False A sales tax is a common example of a progressive tax rate structure. True False In terms of effective tax rates, the sales tax can be viewed as a regressive tax. True False While sales taxes are quite common, currently the U.S. federal government does not impose a sales tax. True False The largest federal tax, in terms of revenue collected, is the social security tax. True False The 9 th Amendment to the U.S. Constitution removed all doubt that a federal income tax was allowed under the U.S. Constitution. True False A common example of an employment related tax is the Medicare tax.
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