C239 EXAMINATION QUESTIONS AND VERIFIED
ANSWERS
What qualifies as a tax? - Is to fund the government agencies that's required, imposed by
a government and not tied directly to the benefit received by the taxpayer.
Earmarked tax - a tax that is assessed for a specific purpose
Tax base - Is the item being taxed x the tax rate
Flat tax - A tax in which a single tax rate is applied throughout the tax base
Graduated taxes - taxes in which the tax base is divided into a series of monetary
amounts, or brackets, where each successive bracket is taxed at a different (gradually higher or
gradually lower) percentage rate.
Marginal tax rate(MTR) - the tax rate that applies to the next additional increment of a
taxpayer's income (or to deductions).
What is the marginal tax rate calculation? - Tax (new total tax - old tax) / Taxable income
(new taxable income - old taxable income)
What is the average tax rate calculation? - Total tax / Taxable income
Average tax rate - the taxpayer's average level of taxation on each dollar of taxable
income
What is the effective tax rate calculation? - = Total tax / Total income
Proportional tax rate structure - also known as a flat tax, this tax rate structure imposes a
constant tax rate throughout the tax base. As the tax base increases, the taxes paid increase
proportionally.
Progressive tax rate structure - imposes an increasing marginal tax rate as the tax base
increases
Regressive tax rate structure - a tax rate structure that imposes a decreasing marginal tax
rate as the tax base increases. As the tax base increases, the taxes paid increase, but the
marginal tax rate decreases.
Income tax - a tax that is the tax base as income imposed by the federal government and
by most states, a levied on individuals, corporations, estates, and trusts
, Employment - taxes consist of old age, survivors, and disability insurance (OASDI) tax,
commonly called the social security tax, and the medical health insurance (MHI) tax known as
the Medicare tax.
Social Security tax - Is to provide basic pension coverage for the retired and disabled,
6.2% on the wage base and self-employed is 12.4%
Medicare tax - Is to help pay medical costs for qualifying individuals, 1.45% on salary or
wages.
Self-employment taxes - Social Security and Medicare taxes paid by the self-employed on
a taxpayer's net earnings from self-employment. For self-employed taxpayers, the terms "self-
employment tax" and "FICA tax" are synonymous.
Unemployment tax - the tax that pays for temporary unemployment benefits for
individuals terminated from their jobs without cause.
Excise taxes - Taxes levied on the retail sale of particular products. They differ from other
taxes in that the tax base for an excise tax typically depends on the quantity purchased rather
than a monetary amount.
Transfer taxes - taxes on the transfer of wealth from one taxpayer to another which is
estate and gift taxes
State and local taxes - Tax base for a sales tax of retail price of goods (state) and some
services and tax imposed by local government for cities, counties, school districts (local).
Property taxes - Are ad valorem taxes, meaning that the tax base for each property's fair
market value of the property.
Real property - Consist of taxes on land, structures, and improvements permanently
attached to land.
Personal property tax - taxes on all other types of property, both tangible and intangible.
Sales tax - A tax imposed of the retail price of goods, retailers are responsible for
collecting and remitting the tax.
Use tax - A tax imposed on the retail price of goods owned, possessed, or consumed
within a state that were not purchased within the state.
Explicit taxes - taxes directly imposed by a government.
Implicit taxes - indirect taxes that result from a tax advantage the government grants to
certain transactions to satisfy social, economic, or other objectives. They are defined as the
ANSWERS
What qualifies as a tax? - Is to fund the government agencies that's required, imposed by
a government and not tied directly to the benefit received by the taxpayer.
Earmarked tax - a tax that is assessed for a specific purpose
Tax base - Is the item being taxed x the tax rate
Flat tax - A tax in which a single tax rate is applied throughout the tax base
Graduated taxes - taxes in which the tax base is divided into a series of monetary
amounts, or brackets, where each successive bracket is taxed at a different (gradually higher or
gradually lower) percentage rate.
Marginal tax rate(MTR) - the tax rate that applies to the next additional increment of a
taxpayer's income (or to deductions).
What is the marginal tax rate calculation? - Tax (new total tax - old tax) / Taxable income
(new taxable income - old taxable income)
What is the average tax rate calculation? - Total tax / Taxable income
Average tax rate - the taxpayer's average level of taxation on each dollar of taxable
income
What is the effective tax rate calculation? - = Total tax / Total income
Proportional tax rate structure - also known as a flat tax, this tax rate structure imposes a
constant tax rate throughout the tax base. As the tax base increases, the taxes paid increase
proportionally.
Progressive tax rate structure - imposes an increasing marginal tax rate as the tax base
increases
Regressive tax rate structure - a tax rate structure that imposes a decreasing marginal tax
rate as the tax base increases. As the tax base increases, the taxes paid increase, but the
marginal tax rate decreases.
Income tax - a tax that is the tax base as income imposed by the federal government and
by most states, a levied on individuals, corporations, estates, and trusts
, Employment - taxes consist of old age, survivors, and disability insurance (OASDI) tax,
commonly called the social security tax, and the medical health insurance (MHI) tax known as
the Medicare tax.
Social Security tax - Is to provide basic pension coverage for the retired and disabled,
6.2% on the wage base and self-employed is 12.4%
Medicare tax - Is to help pay medical costs for qualifying individuals, 1.45% on salary or
wages.
Self-employment taxes - Social Security and Medicare taxes paid by the self-employed on
a taxpayer's net earnings from self-employment. For self-employed taxpayers, the terms "self-
employment tax" and "FICA tax" are synonymous.
Unemployment tax - the tax that pays for temporary unemployment benefits for
individuals terminated from their jobs without cause.
Excise taxes - Taxes levied on the retail sale of particular products. They differ from other
taxes in that the tax base for an excise tax typically depends on the quantity purchased rather
than a monetary amount.
Transfer taxes - taxes on the transfer of wealth from one taxpayer to another which is
estate and gift taxes
State and local taxes - Tax base for a sales tax of retail price of goods (state) and some
services and tax imposed by local government for cities, counties, school districts (local).
Property taxes - Are ad valorem taxes, meaning that the tax base for each property's fair
market value of the property.
Real property - Consist of taxes on land, structures, and improvements permanently
attached to land.
Personal property tax - taxes on all other types of property, both tangible and intangible.
Sales tax - A tax imposed of the retail price of goods, retailers are responsible for
collecting and remitting the tax.
Use tax - A tax imposed on the retail price of goods owned, possessed, or consumed
within a state that were not purchased within the state.
Explicit taxes - taxes directly imposed by a government.
Implicit taxes - indirect taxes that result from a tax advantage the government grants to
certain transactions to satisfy social, economic, or other objectives. They are defined as the
