All of the following statements are true about effective and nominal tax rates EXCEPT:

The statement that effective rates are purely theoretical and not applied in practice is incorrect, making it the exception among the options. Effective tax rates are crucial in practice as they represent the actual rate that taxpayers are charged after accounting for various deductions, exemptions, and credits. This rate is often used in real-world assessments to determine the true economic impact of taxation on individuals or businesses.

Effective tax rates provide a clearer picture of the tax burden because they reflect the actual taxes paid in relation to the income or value of the property being taxed. In contrast, nominal tax rates are the stated rates set by law but do not consider any adjustments for tax policy nuances, such as exemptions or deductions.

The other options accurately describe the characteristics of effective and nominal tax rates. Both types represent a percentage of the tax base, and the effective rate can indeed be lower than the nominal rate due to exemptions and deductions. Additionally, nominal rates can change based on policy decisions, reflecting adjustments that may occur due to fiscal policy changes, budgetary needs, or legislative actions.