A.P. Gov-Economics Ch. 9 – Flashcards
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sin tax
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a relatively high tax designed to raise revenue and reduce consumption of a socially undesirable produce (such as tobacco or alcohol)
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incidence of a tax
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the final burden of a tax
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tax loopholes
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exceptions or oversights in the tax law that allow some people and businesses to avoid paying taxes. these are opposed on the grounds of equity
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individual income tax
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the tax on people's earnings (its a complex tax)
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sales tax
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a general tax levied on most comsumer purchases (its a simple tax)
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benefit principle of taxation
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those who benefit from government goods and services should pay in proportion to the amount of benefits they recieve
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ability-to-pay principle of taxation
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the belief that people should be taxed according to their ability to pay, regardless of their benefits
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proportional tax
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tax imposing the same percentage of taxation on everyone
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average tax rate
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total taxable income divided by total income
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progressive tax
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tax that imposes a higher percentage of taxation on persons with higher incomes
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marginal tax rate
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the tax rate that applies to the next dollar of taxable income, the extra taxes paid on an additional dollar of income
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regressive tax
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tax that imposes a higher percentage rate of taxation on low incomes than on high incomes
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payroll withholding system
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a system that requires an employer to automatically deduct income taxes from an employees paycheck and send it directly to the government
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Internal Revenue Service (IRS)
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branch of the US Treasury Department in charge of collecting taxes
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tax return
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an annual report to the IRS summarizing total income, deductions, and taxes withheld by employers
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indexing
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an upward revision of the tax brackets to keep workers from paying more in taxes just because of inflation
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FICA
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Federal Insurance Contributions Act tax levied on employers and employees to pay for Social Security and medicare
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medicare
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a federal health care program avaliable to all senior citizens
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payroll taxes
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Social Security and medicare; taxes deducted from paychecks
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corporate income tax
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the tax a corporation pays on its profits; seperate from individual taxes
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excise tax
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a tax on the manufacture or sale of selected items. Tends to be a regressive tax
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luxury good
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product where the demand for the good rises faster than income when income grows; tends to be elastic
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estate tax
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tax the government levies on the transfer of property when someone dies
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gift tax
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tax on donations of money or wealth and is paid by the person who makes the gift
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customs duty
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a charge levied on goods imported from other countries
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user fees
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charges levied for the use of a good or service
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intergovernmental revenue
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funds collected by one level of government for expidentures
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property tax
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a tax on tangible and intangible possessions such as real estate, buildings, furniture, cars, farm animals, stocks, bonds, and bank accounts
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tax assessor
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person who assigns value to property for tax purposes
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payroll withholding system
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the summary statement attatched to a paycheck that summarizes income, tax withholdings, and tax deductions
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accelerated depreciation
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larger than normal depreciation charges
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investment tax credit
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a reduction in business taxes that are tied to investment in new plants and equipment
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surcharge
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additional tax above and beyond the base rate
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alternative minimum tax
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the personal income rate that applies whenever the amount of taxes paid falls below a designated level
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capital gains
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profits from the sale of an asset held for 12 months
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value-added tax
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a tax placed on the value that manufacturers add at each stage of production
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flat tax
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a proportional tax on individual income after a specified threshold has been reached
