TAX PRINCIPLES CERTIFICATION
EVALUATION VERIFIED QUESTIONS WITH
COMPLETE SOLUTIONS
●● Individuals
Answer: -tax deductions or home mortgage interest and real estate taxes
can reduce the after tax costs of owning a home
-understanding the tax advantaged methods of saving for retirement can
increase the after-tax value of our retirement nest egg
●● Tax
Answer: compulsory cash payment to the government that is unrelated
to any service or benefit received by the taxpayer
●● What are taxes used for?
Answer: to carry out basic functions including law enforcement,
economic infrastructure, public works, public services, and national
security
●● Tax Formula
Answer: tax bade x tax rate = tax liability
●● Standards for a good tax
, Answer: 1. sufficient: to raise necessary government revenues
2. convenient: to a minister
3. efficient: in economic terms
4. fair: fair to the taxpayer required to play
●● Sufficiency Standard
Answer: a tax is sufficient if:
it generates enough funds to pay for the public goods and services
provided by the government
it allows the government to balance its budget
●● How can the government increase tax revenues?
Answer: 1. exploit a new tax base- most radical and politically sensitive
2. increase the rate of an existing tax - most obvious and least likely to
anger the greatest number of voters
3. enlarge an existing tax base - most subtle and less likely to attract
public attention
●● Static Revenue Forecasting
Answer: forecasting revenue ignores how taxpayers might alter their
activities in response to a tax change and to base projected tax revenues
on the existing rate of transactions
EVALUATION VERIFIED QUESTIONS WITH
COMPLETE SOLUTIONS
●● Individuals
Answer: -tax deductions or home mortgage interest and real estate taxes
can reduce the after tax costs of owning a home
-understanding the tax advantaged methods of saving for retirement can
increase the after-tax value of our retirement nest egg
●● Tax
Answer: compulsory cash payment to the government that is unrelated
to any service or benefit received by the taxpayer
●● What are taxes used for?
Answer: to carry out basic functions including law enforcement,
economic infrastructure, public works, public services, and national
security
●● Tax Formula
Answer: tax bade x tax rate = tax liability
●● Standards for a good tax
, Answer: 1. sufficient: to raise necessary government revenues
2. convenient: to a minister
3. efficient: in economic terms
4. fair: fair to the taxpayer required to play
●● Sufficiency Standard
Answer: a tax is sufficient if:
it generates enough funds to pay for the public goods and services
provided by the government
it allows the government to balance its budget
●● How can the government increase tax revenues?
Answer: 1. exploit a new tax base- most radical and politically sensitive
2. increase the rate of an existing tax - most obvious and least likely to
anger the greatest number of voters
3. enlarge an existing tax base - most subtle and less likely to attract
public attention
●● Static Revenue Forecasting
Answer: forecasting revenue ignores how taxpayers might alter their
activities in response to a tax change and to base projected tax revenues
on the existing rate of transactions
