Chapter 01
An Introduction to Tax

True / False Questions 1. | Taxes influence many types of business decisions but generally do not influence personal decisions. True False | 2. | Taxes influence business decisions such as where a business should locate or how a business should be structured. True False | 3. | Tax policy rarely plays an important part in presidential campaigns. True False | 4. | Margaret recently received a parking ticket. This is a common example of a local tax. True False | 5. | George recently paid $50 to renew his driver's license. The $50 payment is considered a tax. True False | 6. | A 1% charge imposed by a local government on football tickets sold is not considered a tax if all proceeds are earmarked to fund local schools. True False | 7. | One key characteristic of a tax is that it is a required payment to a governmental agency. True False | 8. | Common examples of sin taxes include the taxes imposed on airline tickets and gasoline. True False | 9. | One benefit of a sin tax (e.g., a tax on cigarettes) is that it should increase the demand for the products being taxed. True False | 10. | In addition to raising revenues, specific U.S. taxes may have other objectives (e.g., economic or social objectives). True False | 11. | The two components of the tax calculation are the tax rate and the taxpayer. True False | 12. | The tax base for the federal income tax is taxable income. True False | 13. | A flat tax is an example of a graduated tax system. True False | 14. | The main difficulty in calculating an income tax is determining the correct amount of the tax base. True False | 15. | A taxpayer's average tax rate is the most appropriate tax rate to use in