C239 EXAMINATION QUESTIONS AND VERIFIED
ANSWERS
What is a Tax? - A payment required by a government that is unrelated to any specific benefit or
service received from the government
How is a tax calculated? - Tax = (Tax Base)(Tax Rate)
Marginal Tax Rate (MTR) - The tax rate that applies to the next additional increment of a
taxpayer's taxable income.
MTR Formula - ∆Tax / ∆Income = (MTD-TD) / (Tot Inc-TI)
Average Tax Rate (ATR) - The taxpayer's average level of taxation on each dollar of taxable income.
ATR Formula - TD/ TI
Effective Tax Rate (ETR) - The taxpayer's average rate of taxation on each dollar of total income
(both taxable and non-taxable).
ETR Formula - TD/ (TI+NTI)
Which tax calculation provides a better depiction of a taxpayer's tax burden? - Effective Tax Rate
(ETR)
What is TI? - Taxable Income
What is NTI? - Non-Taxable Income
What is Total Income (Tot Inc)? - Tot Inc = TI + NTI
Proportional (Flat) Tax - Constant tax rate throughout the tax base.
Progressive Tax - Increasing marginal rate as the tax base increases
(Individual Income tax.)
Regressive Tax - Decreasing marginal tax rate as the tax base increases.
What is the Tax Structure of Sales Tax? - Proportional (Flat)
What is the Tax Structure of Individual Income Tax? - Progressive
What is the Tax Structure of Unemployment Income? - Regressive
What is the Tax Structure of Corporate Income? - Now Proportional at 21%
Where is the most tax revenue derived? - Individual Income Tax
What is Income Tax? - Based on your income: Progressive
ANSWERS
What is a Tax? - A payment required by a government that is unrelated to any specific benefit or
service received from the government
How is a tax calculated? - Tax = (Tax Base)(Tax Rate)
Marginal Tax Rate (MTR) - The tax rate that applies to the next additional increment of a
taxpayer's taxable income.
MTR Formula - ∆Tax / ∆Income = (MTD-TD) / (Tot Inc-TI)
Average Tax Rate (ATR) - The taxpayer's average level of taxation on each dollar of taxable income.
ATR Formula - TD/ TI
Effective Tax Rate (ETR) - The taxpayer's average rate of taxation on each dollar of total income
(both taxable and non-taxable).
ETR Formula - TD/ (TI+NTI)
Which tax calculation provides a better depiction of a taxpayer's tax burden? - Effective Tax Rate
(ETR)
What is TI? - Taxable Income
What is NTI? - Non-Taxable Income
What is Total Income (Tot Inc)? - Tot Inc = TI + NTI
Proportional (Flat) Tax - Constant tax rate throughout the tax base.
Progressive Tax - Increasing marginal rate as the tax base increases
(Individual Income tax.)
Regressive Tax - Decreasing marginal tax rate as the tax base increases.
What is the Tax Structure of Sales Tax? - Proportional (Flat)
What is the Tax Structure of Individual Income Tax? - Progressive
What is the Tax Structure of Unemployment Income? - Regressive
What is the Tax Structure of Corporate Income? - Now Proportional at 21%
Where is the most tax revenue derived? - Individual Income Tax
What is Income Tax? - Based on your income: Progressive
