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Principles of Taxation For Business and Investment Planning 2019 22nd Edition Jones Test Bank
Principles of Taxation For Business and Investment Planning 2019 22nd Edition Jones Test Bank
https://testbankfan.com/download/principles-of-taxation-for-business-and-investment-
planning-2019-22nd-edition-jones-test-bank/
1. A tax meets the standard of sufficiency if it is easy for people to pay the tax:
FALSE
2. The federal government is not required to pay interest on the national debt.
FALSE
3. A static forecast of the revenue effect of a tax rate change assumes that the tax base does not change.
TRUE
4. A dynamic forecast of the revenue effect of a tax rate change assumes that the tax base does not change.
FALSE
2-1
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
FALSE
The Social Security tax burden increases annually because the tax base increases annually.
6. If State H increases its sales tax rate by 1%, its sales tax revenue must also increase by 1%.
FALSE
7. The city of Berne recently enacted a 10% tax on the price of a subway ticket. Consequently, Mrs. Lane now walks to work
instead of taking the subway. Her behavior illustrates the substitution effect of a tax increase.
TRUE
Mrs. Lane substituted a nontaxable activity for a taxable activity.
8. Jurisdiction P recently increased its income tax rate. A taxpayer who reacts to the increase by working harder to earn more
income is demonstrating the income effect of the rate increase.
TRUE
2-2
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
9. According to supply-side economic theory, a decrease in tax rates for high-income individuals could actually cause an
increase in tax revenue.
TRUE
10. Supply-side economic theory holds that people who benefit from a tax rate reduction will spend their tax windfall on
consumption goods.
FALSE
Supply-side economic theory predicts that people who benefit from a tax rate reduction will invest their tax windfall in new
economic ventures.
11. State use taxes are more convenient for individual consumers than state sales taxes.
FALSE
State sales taxes are more convenient because they are collected by the seller. Consumers must pay use taxes directly.
12. The Internal Revenue Service's cost of collecting $100 of tax revenue is about $3.
FALSE
The IRS's cost of collecting $100 of tax revenue averages less than 50 cents.
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