Question

At a company fish fry, 1/2 in attendance are employees. Employees' spouses are 1/3 of the attendance. What is the percentage of the people in attendance who are not employees or employee spouses?

A. 10.5%
B. 16.7%
C. 25%
D. 32.3%
E. 38%

Answer 1

The statement that is incorrect with respect to taxation on the CPA exam is C) Progressive tax systems have a constant tax rate regardless of income.

Step-by-step explanation:

The incorrect nature of option C stems from a misunderstanding of the term ""progressive tax system."" In reality, progressive tax systems involve higher tax rates for individuals with higher incomes. The tax rate increases progressively as income rises, resulting in a higher tax burden for those with greater financial means. This design is intended to distribute the tax burden more equitably, with the principle that those who can afford to contribute more should do so.

Contrarily, a constant tax rate regardless of income is a characteristic of a proportional or flat tax system, not a progressive one. In a progressive system, individuals may fall into different tax brackets, each with its own rate. The higher the income, the higher the tax rate applied to that portion of income.

In conclusion, option C is incorrect because it misrepresents the fundamental concept of a progressive tax system. Understanding the principles of different tax systems is crucial for CPAs, as it directly influences their ability to provide accurate tax advice and planning for clients.

So the correct option is C) Progressive tax systems have a constant tax rate regardless of income.