1. Which of the following can contribute toward a phantom balance in an operating budget?
a. Transfer operating expenses to the capital budget.
b. Accelerate payment of income tax refunds.
c. Issue payroll checks on June 15 rather than June 20 (July 1 fiscal year start).
d. Change the estimate of the property tax delinquency rate from 5 percent to 10 percent, to better reflect actual collection patterns.
2. A requirement that the Governor’s operating budget be balanced usually means that:
a. All expenditure proposed in that document must be covered either by revenue raised currently, available from prior year surpluses, or by borrowing on the promise to repay from future revenues.
b. All expenditure proposed in that document must be covered either by revenue raised within the budget year or available from prior year surpluses.
c. The state can have no debt.
d. State expenditure cannot exceed state revenue for the year.
3. An advantage of the traditional line item budget is
a. Accountability and responsibility are easily assigned.
b. Costs of defined activities are identified.
c. The long timeframe allows for decision-making and planning.
d. Appropriations are flexible to allow for achievement of desired outcomes.
5. Performance budgets:
a. link performance objectives to requests for funds.
b. do not focus on measurable activities.
c. classify the budget by goals or objectives (e.g., Protection of Persons and Property, Safe and Speedy Transportation).
d. None of the above.
6. The budget process which emphasizes the achievement of goals and competition between alternatives is:
a. incremental budgeting.
b. performance budgeting.
c. program budgeting.
d. target based budgeting.
7. A feature that distinguishes a traditional performance budget from other budget classification structures is:
a. unit cost estimates for tasks or activities.
b. quantitative performance objectives for agencies and departments.
c. cost estimates for each agency.
d. measurement of worth of agency functions to society.
8. A lower discount rate applied to a given flow of returns in the future (e.g., $5,000 at the end of 5 years, $10,000 at the end of 10 years, $15,000 at the end of 15 years, etc.) will cause the present value of that flow to:
a. remain unchanged if the future dollars do not change.
b. increase.
c. decrease.
d. change in a direction that cannot be determined in general.
9. Which of the following is not a characteristic of a capital expenditure, for the purposes of government budgeting?
a. recurring expenditure
b. large price tag
c. long life
d. none of the above
10. For the income tax, in a regressive tax rate structure:
a. the average tax rate is lower than the marginal tax rate.
b. the average tax rate increases with the size of the tax base.
c. the effective tax rate decreases as the size of the tax base increases.
d. the effective tax rate does not vary with the size of the tax base.
11. The concept of vertical equity states that:
a. equals should be treated equally in a tax system.
b. unequals should be treated equally in a tax system.
c. equals should be treated unequally in a tax system.
d. unequals should be treated unequally in a tax system.
12. The marginal tax rate equals:
a. tax paid divided by the appropriate measure of affluence.
b. the tax liability resulting from true application of the tax statutes divided by the statutory base.
c. the tax rate required, at the margin, to balance the budget.
d. the amount by which a taxpayer’s tax would increase from an additional dollar of the tax base.
13. Tax credits, exemption, and exclusions all can be used by governments to reduce taxes. Consider a credit of $5,000, an exemption of $5,000, and an exclusion of $5,000—all to be added to the existing federal individual income tax. Which of the following statements is correct?
a. The revenue lost by the U.S. Treasury would be greatest for the exclusion, because such a provision removes transactions which would appear to be income from the tax base.
b. The personal exemption would save the individual taxpayer the most money because it would have the greatest relative increase over existing exemption levels (currently somewhat over $2,000).
c. The credit will cause greater revenue loss, because it takes effect after rates are applied and directly reduces tax liability.
d. All tax reducing impacts would be the same.
14. Under the current federal individual income tax law, which of the following would be an exclusion?
a. Wages paid by a non-profit organization, like the Red Cross.
b. Interest paid on a bond issued by a state government.
c. The value of an old car you received in exchange for painting a house.
d. All the above are exclusions.
15. Exemption of food purchases from a sales tax reduces regressivity because:
a. the percent of income spent on food generally declines as family income increases.
b. total food purchases decline as income increases.
c. low income families spend more money on food than do high income families.
d. food exemption does not reduce regressivity.
16. A common criticism of retail sales and excise taxes is:
a. they are progressive with respect to income.
b. they are general taxes with no allowed exemptions.
c. they are regressive with respect to income.
d. they tend to be shifted backward.
17. Which of the following is a unit excise tax?
a. The 5 percent Indiana state sales tax.
b. A 10 percent sales tax on beer.
c. A 10 cents per gallon beer tax.
d. The Indiana motor vehicle excise tax levied each year at a rate varying by the value of your car when it was new.
18. Fractional assessment refers to:
a. the practice states use to divide formula funding among cities.
b. the balance of corporate profits across state jurisdictions.
c. assessing properties at less than market value for tax purposes.
d. None of the above.
19. Which of the following would ordinarily not be taxed in a local real property tax?
a. land subdivided for residential construction
b. an apartment building
c. a shopping center
d. a private collection of valuable paintings by Picasso and Monet
20. Which of the following does not constitute a property tax relief measure?
a. circuit breakers
b. deferrals
c. exemptions
d. all of the above constitute property tax relief measures