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Exam 1: An Introduction to Tax

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Question 61

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Ricky and Lucy are debating several types of taxes. Their debate has focused on the different types of tax rate structures and whether they are "fair." Please define each tax rate structure, provideexamples of each structure, and discuss how each structure may be viewed with respect to vertical equity.

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A proportional (flat) tax rate structure...

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Question 62

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To be indifferent between investing in the two bonds, the Moe's, Inc. bond should provide Namratha t same after-tax rate of return as the city of Watkinsville bond (4.5%). To solve for the required pre-tax rate of return we can use the following formula: After-tax return = Pre-tax return × (1 - Marginal Tax Rate). Moe's, Inc. needs to offer a 6% interest rate to generate a 4.5% after-tax return and make Namratha indifferent between investing in the two bonds. 4.5% = Pre-tax return × (1 - 25%); Pre-tax return = 4.5%/(1 - 25%) = 6% -Given the following tax structure, what is the minimum tax that would need to be assessed on Dora to make the tax progressive with respect to average tax rates? What is the minimum tax that would need to beassessed on Dora to make the tax progressive with respect to effective tax rates? Taxpayer Salary Muni-Bond Interest Total TaxDiego 30,000 10,000 1,500Dora 50,000 5,000 ???

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Diego's average tax ...

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Question 63

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One benefit of a sin taxthe products being taxed.

Marc, a single taxpayer, earns $60,000 in taxable income and $5,000 in interest from an investment in city of Birmingham Bonds. Using the U.S. tax rate schedule for year 2017, how much federal tax will he owe? (Use tax rate schedule.)

Milton and Rocco are having a heated debate regarding a national sales tax. Milton argues that a national sales tax is a proportional, vertically equitable tax. Rocco argues that a national sales tax would be a regressive, vertically inequitable tax. Explain both sides of the argument.

Nelson has the choice between investing in a city of Fruithurst bond at 4% or a J.B. Ribs, Inc. bond at 6.5%. Assuming that both bonds have the same non-tax characteristics and that Nelson has a 40% marginal tax rate, in which bond should he invest? What interest rate offered by J.B. Ribs, Inc. would make Nelson indifferent between investing in the two bonds?

Oswald is beginning his first tax course and does not really have a solid understanding of the role that taxes play in various decisions. Please describe for Oswald the various types of decisions that taxes may influence.

Which of the following is true?

Tax policy rarely plays an important part in presidential campaigns.

Which of the following taxes represents the largest portion of U.S. Federal Tax revenues?