Deck 41: Personal Income Taxes

Question 1

Taxable income is

A)Adjusted Gross Income - Exemptions.
B)Adjusted Gross Income - Exemptions - Deductions.
C)Adjusted Gross Income - Exemptions - Deductions - Credits.
D)Adjusted Gross Income - Exemptions - Deductions - Credits - Taxes Withheld.

Answer 1

B

Question 2

A tax structure is progressive as long as a person who has more income pays

A)more tax than someone who has less income.
B)a higher rate of tax than someone who has less income.
C)the same tax than someone who has less income.
D)the same rate of tax than someone who has less income.

Answer 2

B

Question 3

If a single person has a standard deduction of $6,300, itemized deductions of $3,650 and a personal exemption of $4,000, then the first _____ of income is federal income tax free.

A)$7,650
B)$9,950
C)$10,300
D)$13,950

Answer 3

C

Question 4

The marginal tax rate is

A)the percentage of all dollars of income paid in tax.
B)the percentage of all taxable dollars of income paid in tax.
C)the percentage of the last dollar of income paid in tax.
D)the percentage of all dollars of income paid in tax and the percentage of the last dollar of income paid in tax.

Question 5

If a single person has a standard deduction of $6,300, itemized deductions of $6,650 and a personal exemption of $4,000, then the first _____ of income is federal income tax free.

A)$10,300
B)$10,650
C)$12,950
D)$16,950

Question 6

The amount a family can take in deductions is the larger of

A)their exemptions and the standard deduction.
B)their exemptions and their itemized deductions.
C)their exemptions and their capital gains.
D)their standard deduction and their itemized deductions.

Question 7

If a household has a husband, wife and two kids, has a standard deduction of $12,600, its itemized deductions are $6,650 and personal exemptions of $16,000 (4*$4,000), then the first _____ of income is federal income tax free.

A)$13,250
B)$20,650
C)$28,600
D)$34,250

Question 8

The earned income tax credit goes to

A)non-working poor people living off of government assistance.
B)the retired.
C)low-income working people.
D)all taxpayers regardless of income.

Question 9

Exemptions are reductions of adjusted gross income that depend on

A)family structure (i.e. filing status).
B)family size.
C)how money is spent (e.g. on state and local taxes or home mortgage interest).
D)how much money is saved.

Question 10

Personal income tax withholding is

A)voluntary.
B)involuntary.
C)designed to spread out the impact of taxes throughout the year.
D)involuntary and designed to spread out the impact of taxes throughout the year.

Question 11

In 2015, personal income taxes made up _____ of federal government revenues.

A)much more than a quarter
B)much less than a quarter
C)just more than half
D)just less than half

Question 12

If a household has a single woman and three kids, has a standard deduction of $6,300, its itemized deductions are $5,650 and personal exemptions of $12,000 (3*$4,000), then the first _____ of income is federal income tax free.

A)$11,950
B)$18,300
C)$17,650
D)$28,950

Question 13

The filing status of a person who is legally married yet separated as a result of a messy impending divorce is likely to be

A)married filing jointly.
B)married filing separately.
C)single head of household.
D)single.

Question 14

Itemized deductions are reductions of adjusted gross income that depend on

A)family structure (i.e. filing status).
B)family size.
C)how money is spent (e.g. on state and local taxes or home mortgage interest).
D)how much money is saved.

Question 15

If a household has a single woman and three kids, has a standard deduction of $6,300, its itemized deductions are $10,650 and personal exemptions of $12,000 (3*$4,000), then the first _____ of income is federal income tax free.

A)$16,850
B)$18,300
C)$22,650
D)$28,950

Question 16

Capital gains are

A)total net income from all sources.
B)any profit you have from asset sales.
C)total sales prices of from assets.
D)the amount of income a taxpayer has after taxes are paid.

Question 17

The standard deduction depends on

A)family structure (i.e. filing status).
B)family size.
C)how money is spent (e.g. on state and local taxes or home mortgage interest).
D)how much money is saved.

Question 18

The filing status of an unmarried single parent living with another person is likely to be

A)married filing jointly.
B)married filing separately.
C)single head of household.
D)single.

Question 19

If a household has a husband, wife and two kids, has a standard deduction of $12,600, its itemized deductions are $13,850 and personal exemptions of $16,000 (4*$4,000), then the first _____ of income is federal income tax free.

A)$28,600
B)$29,850
C)$37,100
D)$41,450

Question 20

Adjusted gross income is

A)total income from all sources.
B)any profit you have from asset sales.
C)income after deductions and exemptions are taken.
D)the amount of income a taxpayer has after taxes are paid.

Question 21

The child credit goes to

A)children directly.
B)all households raising children under 18.
C)only households raising foster children.
D)states to help pay for child-care.

Question 22

Economists generally believe that tax credits and deductions that are used to create an incentive for individuals to go to college

A)perversely, cause fewer people to go to college.
B)cause dramatically more people to go to college, working precisely as was intended.
C)cause a few more people to go to college, working somewhat as was intended.
D)cause no more people to go to college, amounting to a special break for people who would have gone to college anyway.

Question 23

If a tax is placed on one good and not another, the effect that causes you to buy less of the taxed good because it has become relatively more expensive is called the

A)substitution effect.
B)net effect.
C)income effect.
D)domino effect.

Question 24

If a person were given the choice of a $500 credit or a $500 deduction

A)he would take the deduction every time.
B)he would take the credit every time.
C)he would take the deduction if he were rich the credit if he were poor.
D)he would take the deduction if he were poor credit if he were rich.

Question 25

The majority of economists would argue that an increase in taxes

A)dramatically increases savings.
B)dramatically decreases savings.
C)has little or no effect on savings.
D)slightly increases savings.

Question 26

The alternative minimum tax (AMT)was created to

A)make sure poor people paid at least something in taxes.
B)make sure that everyone had an equal chance of facing a tax audit.
C)make sure that everyone paid the same proportion of their income in taxes.
D)make sure that upper income taxpayers could not use deductions to avoid paying income taxes.

Question 27

An example of the "equity vs. simplicity" tradeoff is the tax treatment of

A)capital gains.
B)earned income.
C)children.
D)spouses.

Question 28

Vertical equity means that

A)equal people are treated unequally.
B)equal people are treated equally.
C)people across the income scale are treated fairly with regard to ability to pay.
D)people pay a flat rate.

Question 29

A tax code is described as being "neutral" if it

A)does not favor particular forms of income or expenditures.
B)achieves both vertical equity and horizontal equity.
C)favors socially good consumption over destructive consumption.
D)encourages work and savings rather than consumption.

Question 30

The instructions and rules for the alternative minimum tax are generally

A)far easier to understand than the instruction and rules for the 1040EZ.
B)far easier to understand than the instruction and rules for the 1040.
C)no more or less difficult to understand than the instructions and rules for the 1040.
D)much more complicated than the instructions and rules for the 1040.

Question 31

If a person were in the 15% tax bracket and given the choice of a $500 credit or a $2500 deduction

A)he would take the deduction every time.
B)he would take the credit every time.
C)he would not care. They would constitute the same tax benefit.
D)he would not qualify for either.

Question 32

If a person were in the 25% tax bracket and given the choice of a $500 credit or a $2500 deduction

A)he would take the deduction every time.
B)he would take the credit every time.
C)he would not care. They would constitute the same tax benefit.
D)he would not qualify for either.

Question 33

Which of the following elements of the federal income tax code are not indexed for inflation?

A)The brackets
B)The standard deduction
C)The personal exemption
D)All of these elements are indexed.

Question 34

Simply indexing the alternative minimum tax for inflation and making no other adjustments would

A)help the poor more than the rich.
B)help the rich more than the poor.
C)help all people equally.
D)result in a large surplus.

Question 35

The child care credit goes

A)directly to child care centers.
B)directly to children under 6.
C)to all households spending money on child and elder care so that they may work.
D)directly to the states.

Question 36

Economists estimate that an increase in tax rates by 8% will _______ work by _____.

A)decrease; 15%
B)increase; 15%
C)decrease; 1%
D)increase; 1%

Question 37

Horizontal equity means that

A)equal people are treated unequally.
B)equal people are treated equally.
C)people across the income scale are treated fairly with regard to ability to pay.
D)people pay a flat rate.

Question 38

If a tax is placed on one good and not another, the effect that causes you to buy more or less of the taxed good because you have less real buying power is called

A)substitution effect.
B)net effect.
C)income effect.
D)domino effect.

Question 39

If a person were given the choice of a $500 credit or a $2500 deduction

A)he would take the deduction every time.
B)he would take the credit every time.
C)he would take the deduction if he were in the 25% tax bracket, the credit if he were in the 15% tax bracket.
D)he would take the deduction if he were in the 15% tax bracket, the credit if he were in the 25% tax bracket.

Question 40

If a person were in the 20% tax bracket and given the choice of a $500 credit or a $2500 deduction

A)he would take the deduction every time.
B)he would take the credit every time.
C)he would not care. They would constitute the same tax benefit.
D)he would not qualify for either.

Question 41

An across-the-board income tax cut where all income taxes were cut by a constant percentage would

A)necessarily go to higher income people.
B)alter the after-tax distribution of income in favor of high income people.
C)by definition, keep the after-tax distribution of income relationships constant.
D)necessarily go to higher income people and alter the after-tax distribution of income in favor of high income people.

Question 42

The 2001 and 2003 tax cuts of the George W. Bush administration each had provisions to

A)lower the earned income tax credit.
B)raise tax rates at the lower end.
C)raise tax rates at the upper end.
D)phase out the estate tax.

Question 43

The top 10% of income earners pay ____ of federal income taxes.

A)10%
B)53%
C)71%
D)93%

Question 44

The 2001 and 2003 tax cuts of the George W. Bush administration each had provisions to

A)lower the earned income tax credit.
B)raise tax rates at the lower end.
C)raise tax rates at the upper end.
D)lower (or speed up the already scheduled lowering)of tax rates.

Question 45

The tax reform package that eliminated much of the social engineering aspects within the tax code was passed in

A)1982 during Reagan's first term.
B)1986 during Reagan's second term.
C)1993 during Clinton's first term.
D)2001 during George W. Bush's first term.

Question 46

Provisions of the 2009 Economic Recovery Act (i.e., President Obama's "Stimulus Package")calling for tax credits for first-time home buyers and hybrid cars confirm that the

A)Obama Administration is committed to across-the-board reductions in personal income tax rates.
B)Obama Administration believes that taxes can alter the spending decisions of taxpayers.
C)Bush Administration's tax cuts were too costly.
D)credo of Congress is "No Good Deed Will Go Untaxed."

Question 47

One of the key income tax topics debated during the 2008 Presidential election was whether the

A)2003 tax cuts should be allowed to expire in 2011.
B)1986 tax increases should be finally repealed in 2011.
C)National sales tax should be abolished and replaced with a single income tax rate of 21%.
D)Iraqi oil revenues should be taxed by the U.S. to provide care for disabled Iraqi War veterans.

Question 48

In 2015, the U.S. personal income tax system consisted of the following tax rates:

A)5%, 10%, 15%, 20%, 25% and 30%.
B)5%, 10%, 15%, 25%, 30% and 35%.
C)10%, 15%, 25%, 28%, 33%, 35% and 39.6%.
D)10%, 20%, 30%, 40%, 55% and 69%.

Question 49

The lower half of income earners pay ___ of federal income taxes.

A)1%
B)2%
C)14%
D)38%

Question 50

One of the key income tax topics debated during the 2010 mid-term elections was whether the

A)2003 tax cuts should be allowed to expire in 2011.
B)1986 tax increases should be finally repealed in 2011.
C)national sales tax should be abolished and replaced with a single income tax rate of 21%.
D)Iraqi oil revenues should be taxed by the U.S. to provide care for disabled Iraqi War veterans.

Question 51

Capital gains tax liabilities usually

A)do not include any taxation of actual inflation.
B)are recognized only upon the sale of a capital asset.
C)are recognized before the sale of a capital asset, as the gain actually accrues.
D)must be recognized and paid by the estate of the decedent upon death.

Question 52

Shortly after the 2012 election, the AMT was reformed to

A)reduce the tax liabilities of the taxpayers with the lowest taxable incomes.
B)remove inflation.
C)reduce the tax liabilities of the taxpayers with the highest taxable incomes.
D)index its thresholds for inflation.

Question 53

One of the key outcomes of the 2010 mid-term elections was that

A)2003 tax cuts were continued for everyone through the end of 2012.
B)1986 tax increases were finally repealed in 2011.
C)A national sales tax was created and replaced the income tax.
D)Iraqi oil revenues were taxed by the U.S. to provide care for disabled Iraqi War veterans.

Question 54

The 2001 and 2003 tax cuts of the George W. Bush administration each had provisions to

A)lower the earned income tax credit.
B)raise tax rates at the lower end.
C)raise tax rates at the upper end.
D)increase (or speed up the already scheduled increase in)the child tax credit.

Question 55

The income tax acts as a wedge driven between the value a worker creates and her highest possible

A)inheritance.
B)capital gain.
C)take-home pay.
D)mortgage loan.