Chapter 1 An Introduction to Tax,,

(1)
[LO4] What are some of the
taxes that currently are unique to state and local governments? What are some of the taxes that the federal,
state, and local governments each utilize?

(2)
[LO4] The state of Georgia
recently increased its tax on a pack of cigarettes by $2.00. What type of tax is this? Why might Georgia choose this type of tax?

(3)
[LO4] What is the difference
between a sales tax and a use tax?

(4)
[LO4] What is an ad valorem tax? Name an example of this type of tax.

(5)
[LO4] What are the differences
between an explicit and an implicit tax?

(6)
[LO4] When we calculate average
and effective tax rates, do we consider implicit taxes? What effect does this have on taxpayers’
perception of equity?

(7)
[LO4] Benjamin recently bought
a truck in Alabama for his business in Georgia.
What different types of federal and state taxes may affect this
transaction?

(8)
[LO5] Kobe strongly dislikes
SUVs and is appalled that so many are on the road. He proposes to eliminate the federal income
tax and replace it with a $50,000 annual tax per SUV. Based on the number of SUVs currently owned
in the United States, he estimates the tax will generate exactly the amount of
tax revenue currently collected from the income tax. What is wrong with Kobe’s proposal? What type of forecasting is Kobe likely
using?

(9)
[LO5] What is the difference
between the income and substitution effects?
For which types of taxpayers is the income effect more likely
descriptive? For which types of taxpayers
is the substitution effect more likely descriptive?

(10)
[LO5] What is the difference
between horizontal and vertical equity?
How do tax preferences affect people’s view of horizontal equity?

(11)
[LO3, LO5] Montel argues that a
flat income tax rate system is vertically equitable. Oprah argues that a progressive tax rate
structure is vertically equitable. How
do their arguments differ? Who is
correct?

(12)
[LO3, LO5] Discuss why
evaluating vertical equity simply based on tax rate structure may be less than
optimal.

(13)
[LO4, LO5] Compare the federal
income tax to sales taxes using the “certainty” criterion.

(14)
[LO5] Many years ago a famous
member of Congress proposed eliminating federal income tax withholding. What criterion for evaluating tax systems did
this proposal violate? What would likely
have been the result of eliminating withholding?

(15)
[LO5] “The federal income tax
scores very high on the economy criterion because the current IRS budget is
relatively low compared to the costs of a typical collection agency.” Explain why this statement may be considered
wrong.