Question 1

Given the following tax structure,what amount of tax would need to be assessed on Carrie to make the tax horizontally equitable? What is the minimum tax that Simon should pay to make the tax structure vertically equitable based on Fantasia's tax rate? This would result in what type of tax rate structure?
 $$\begin{array} { | l | r | r | } 
\hline { \text { Tuxpuyer } } & \text { Salary } &{ \text { Tatal Tux } } \
\hline \text { Fartasia } & 20,000 & 1,500 \
\hline \text { Zimon } & 30,000 & 2,000 \
\hline \text { Cartie } & 20,006 & ? ? ? \
\hline
\end{array}$$

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Question 2

Jed Clampett is expanding his family-run beer distributorship into Georgia or Tennessee.His parents began the business many years ago and now three generations of Clampetts work in the family business.Jed will relocate the entire family (his parents,spouse,children,etc.)to either state after the move.What types of taxes may influence his decision of where to locate his business? What non-tax factors may influence the decision?

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Question 3

Consider the following tax rate structure.Is it horizontally equitable? Why or why not? Is it vertically equitable? Why or why not?
 $\begin{array}{|c|r|r}
\hline{\text { Taxpayer }} &{\text { Salary }} &{\text { Total Tax }} \
\hline \text { Moe } & 20,000 & 1,500 \
\hline \text { Laryy } & 40,000 & 8,500 \
\hline \text { Curly } & 100,000 & 25,500 \
\hline
\end{array}$

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Question 4

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?

Accepted Answer

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Question 5

Nick and Jessica are married taxpayers that file married filing separately.Jessica earns $250,000 of taxable income per year.Nick earns $130,000 of taxable income per year.Using the appropriate U.S.tax rate schedule for year 2017,how much tax does each of them pay? What are their marginal and average tax rates? How much tax would they save,if any,if they filed jointly? (Round the tax rates to 2 decimal places,e.g.,.12345 as 12.35%)(Use tax rate schedule in the text)

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Question 6

Ariel invests $50,000 in a city of Las Vegas bond that pays 5% interest.Alternatively,Ariel could have invested the $50,000 in a bond recently issued by Jittery Joe's,Inc.that pays 8% interest with similar non-tax characteristics as the city of Las Vegas bond (e.g.,similar risk).Assume that Ariel's marginal tax rate is 25%.What is her after-tax rate of return for the city of Las Vegas bond? For the Jittery Joe's,Inc.bond? How much explicit tax does Ariel pay on the city of Las Vegas bond? How much implicit tax does she pay on the city of Las Vegas bond? How much explicit tax would she have paid on the Jittery Joe's,Inc.bond? Which bond should she choose?

Accepted Answer

The answer of Ariel invests $50,000 in a city of...

Question 7

Consider the following tax rate structures.Is it horizontally equitable? Why or why not? Is it vertically equitable? Why or why not?
 $$\begin{array} { | l | r | r | } 
\hline  { \text { Texpuyer } } & { \text { Salary } } &  { \text { Tatal Tux } } \
\hline \text { Lucy } & 40,000 & 4,500 \
\hline \text { Ricky } & 20,000 & 4,500 \
\hline \text { Ethel } & 40,000 & 4,500 \
\hline
\end{array}$$

Accepted Answer

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Question 8

Junior earns $80,000 taxable income as a regional circuit stock car driver and is taxed at an average rate of 25 percent (i.e.,$20,000 of tax).If Congress increases the income tax rate such that Junior's average tax rate increases from 25% to 30%,how much more income tax will he pay assuming that the income effect is larger than the substitution effect? What effect will this tax rate change have on the tax base and tax collected? What will happen to the government's tax revenues if Junior chooses to spend more time pursuing his other passions besides work (e.g.,earns only $60,000 in taxable income)in response to the tax rate change? What is the term that describes this type of reaction to a tax rate increase? (Round your answers to two decimal places.)

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The answer of Junior earns $80,000 taxable income as a...

Question 9

Congress would like to increase tax revenues by 20 percent.Assume that the average taxpayer in the United States earns $80,000 and pays an average tax rate of 17.5%.If the income effect is larger than the substitution effect,what average tax rate will result in a 20 percent increase in tax revenues? This is an example of what type of forecasting?

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Question 10

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 be assessed on Dora to make the tax progressive with respect to effective tax rates?
 $\begin{array}{|c|r|r|r}
\hline \text { Taxpayer } & \text { Salary } & \text { Muni-Bond Interest } & {\text { Total Tax }} \
\hline \text { Diego } & 30,000 & 10,000 &1,500 \
\hline \text { Dora } & 50,000 & 5,000 &???\
\hline
\end{array}$

Accepted Answer

The answer of Given the following tax structure,what is the...

Question 11

Fred and Wilma,married taxpayers,earn $100,000 in taxable income and $20,000 in interest from an investment in city of Bedrock Bonds.Using the U.S.tax rate schedule for married filing jointly for year 2017,how much federal tax will they owe? What is their average tax rate? What is their effective tax rate? What is their current marginal tax rate? If Fred and Wilma earn an additional $40,000 of taxable income,what is their marginal tax rate on this income? (Round the tax rates to 2 decimal places,e.g.,.12345 as 12.35%)(Use tax rate schedule in the text)

Accepted Answer

The answer of Fred and Wilma,married taxpayers,earn $100,000 in taxable...

Question 12

Given the following tax structure,what is the minimum tax that would need to be assessed on Lizzy to make the tax progressive with respect to average tax rates? What is the minimum tax that would need to be assessed on Lizzy to make the tax progressive with respect to effective tax rates?
 $\begin{array}{|c|r|r|r}
\hline \text { Taxpayer } & \text { Salary } & \text { Muni-Bond Interest } & \text { Total Tax } \
\hline \text { Mort } & 20,000 & 5,000 & 4,000 \
\hline \text { Lizzy } & 80,000 & 30,000 & ? ? ? \
\hline
\end{array}$

Accepted Answer

The answer of Given the following tax structure,what is the...

Question 13

Namratha has the choice between investing in a city of Watkinsville bond at 4.5% or a Moe's,Inc.bond at 7%.Assuming that both bonds have the same non-tax characteristics and that Namratha has a 25% marginal tax rate,in which bond should she invest? What interest rate offered by Moe's,Inc.would make Namratha indifferent between investing in the two bonds?

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Quiz 1: An Introduction to Tax