Assignment CHAPTER 1: Property Taxation Exam Questions With Correct Answers
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Tax
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Tax
Assignment CHAPTER 1: Property Taxation
Exam Questions With Correct Answers
Two effects of site value taxation are the liquidity effect and the incentive effect. Which statement
below is FALSE?
(1) Liquidity effect: land tax increases holding costs.
(2) Incentive effect: the supply curve for i...
Assignment CHAPTER 1: Property Taxation
Exam Questions With Correct Answers
Two effects of site value taxation are the liquidity effect and the incentive effect. Which statement
below is FALSE?
(1) Liquidity effect: land tax increases holding costs.
(2) Incentive effect: the supply curve for improvements shifts to the right.
(3) Incentive effect: tax on land will affect the quantity of land supplied.
(4) Both the incentive and liquidity effect will reduce urban sprawl. - answer✔Answer: 3
Option (3) is a false statement because with the incentive effect a tax on land will NOT affect the
quantity of land supplied. This is due to the fact that the supply of land is fixed or inelastic.
Which of the following is NOT a direct problem resulting from Proposition 13?
(1) The system discriminates against growing families.
(2) The system is based on legality rather than market value.
(3) Valuation in California has become more complex.
(4) There is an incentive to conduct property transactions so that reported sale prices appear lower. -
answer✔Answer: 2
Proposition 13 has created several problems in the state of California including: a system that
discriminates against growing families; incentives to conduct property transactions under the table; and
appraisal, valuation, appeal, and administration functions have become more complex, with errors in
inventory gathering and administration. Option (3) outlines the intent of the Proposition 13 legislation,
rather than a direct problem resulting from it.
Which of the following statements is/are TRUE?
A. Local control of assessment promotes uniformity of administrative procedures.
B. Canada has a more integrated property tax system than Denmark.
D. In Canada, property taxes are administered federally.
(1) A and D
(2) A, B, and C
(3) C only
(4) All of the statements are true. - answer✔Answer: 3
Statement C is the only true statement. Statement A is false, because central control of assessment
promotes uniformity of administrative procedures. Statement B is false, because Denmark is well noted
for its extensive integrated tax system. Statement D is incorrect, as property tax in Canada is
administered locally by municipal governments.
Which of the following is NOT generally considered to be a regressive tax?
(1) Pure income tax.
(2) The Goods and Services Tax.
(3) A poll tax.
(4) A tax that represents a larger proportion of income for those who earn a lower income compared to
those who earn a higher income. - answer✔Answer: 1
Option (1) is the correct answer. The pure income tax is a progressive tax because tax rates increase as
income increases. Option (2), the Goods and Services Tax (GST), is a sales tax in Canada. Sales taxes in
general are often argued to be regressive because those with lower incomes spend a larger proportion
of their income on consumption. Option (3), a poll tax, is not based on income, but rather a charge on
everyone (i.e., the poorer you are, the bigger proportion of your income is going to the tax, compared to
a rich person). Option (4) is the definition of a regressive tax.
The definition of the "Old View" perspective regarding the regressiveness and progressiveness of taxes,
holds all of the following EXCEPT:
(1) tax on structures can be shifted to consumers.
(2) property taxes are imposed at a uniform rate across the country.
(3) Property tax that falls on land must be borne by landowners.
(4) land is assumed to be fixed in supply. - answer✔Answer: 2
The "Old View" regarding the regressiveness and progressiveness of tax divides property tax into two
categories: land and improvements (structures). Because structures are investment decisions, the
property tax that falls on the structure can be shifted to the price of the consumer goods and services
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