Essay Summary of Chapter 14 Econ
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tax
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required payment to a local, state, or national government -primary way that the government collects money
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revenue
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income received by a government from taxes and other non tax sources
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progressive tax
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a tax for which the percentage of income paid in taxes increase as income increases -federal income tax is an example
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proportional tax
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a tax for which the percentage of income paid in taxes remains the same at all income levels -income tax is an example
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regressive tax
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tax for which the percentage of income paid in taxes decreases as income increases -sales tax is an example
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tax base
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the income, property, good, or service that is subject to a tax
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individual income tax
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a tax based on a person's earnings
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corporate income tax
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tax based on a company's profits
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property tax
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a tax based on real estate and other property
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sales tax
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a tax based on goods or services that are sold
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incidence of a tax
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the final burden of a tax
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what gives the government the right to tax
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through the constitution and our elected representatives
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why does the government collect taxes
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it gives the government the money it needs to operate
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four characteristics of a good tax
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simplicity, efficiency, certainty, equity
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withholding
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taking tax payments out of an employee's pay before he or she receives it
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tax return
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a form used to file income taxes
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taxable income
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the earnings on which tax must be paid; total income minus exemptions and deductions
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personal exemptions
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a set amount that taxpayers may subtract from their gross income for themselves, their spouse, and any dependents
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tax deduction
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a variable amount that taxpayers may subtract from their gross income
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tax credit
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a variable amount that taxpayers may subtract from the toal amount of their income tax
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estate tax
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tax on the total value of the money and property of a person who has died
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gift tax
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a tax on the money or property that one living person gives to another
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tariff
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a tax on imported goods
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tax incentive
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the use of taxation to discourage or encourage certain types of behavior
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how do most people pay their income tax throughout the year
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\"pay as you earn\" pay for income as they earn
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what are tax brackets
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a range of incomes taxed at a given rate
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why is it hard to figure out a corporation's taxable income
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because businesses can take many deductions
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What two programs do FICA taxes fun
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old age and disability insurance
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two examples of tax incentives
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federal taxes on tobacco products and alcoholic beverages
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mandatory spending
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spending that Congress is required by existing law to do example: social security, medicare
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discretionary spending
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spending about which Congress is free to make choices example: national defense
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entitlement
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social welfare program that people are \"entitled to\" benefit from is they meet certain eligibility requirements
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medicare
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for the old
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medicaid
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for the poor
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three examples of entitlement programs
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social security, medicare, medicaid (mandatory spending)
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what problem will the social security system soon face
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today's high school student might receive only limited benefits from social security when they retire
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how much of the federal budget goes to national defense? What are three other categories of discretionary spending?
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accounts for half; education, student loans, scientific research
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four examples of federal aid to state and local governments
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education, lower-income housing, highway construction, mass transit
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budget
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an estimate of future revenue and expenses
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operating budget
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a budget for day-to-day spending needs
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capital budget
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a budget for spending on major investments
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balanced budgets
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a budget in which revenue and spending are equal
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tax exempt
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not subject to taxes
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real property
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land and any permanent structures on the land to which a person has legal title
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personal property
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movable possessions or assets
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tax assessor
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an official who determines the value of property
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what is the most important type of local tax
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sales tax
