Wheeler-Economics-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 product such as liquor or tobacco
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incidence of tax
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the final burden of the 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
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individual income tax
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tax on people's earnings
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sales tax
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a general tax levied on most consumer purchases
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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 the benefits they recieve
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proportional tax
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imposes the same percentage rate of taxation on everyone, regardless of income
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average tax rate
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total taxable income divided by the total income
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progressive tax
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a tax that imposes a higher percentage rate of taxation on persons with higher incomes
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marginal tax rate
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tax rate that applies to the next dollar of taxable income, that increases as the amount of taxable income increases
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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 employee's paycheck and send it directly to the government
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Internal Revenue Service
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the branch of the U.S. 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 the 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 both employers and employees to pay for Social Security and medicare
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medicare
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a federal health-care program available to all senior citizens, regardless of income
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payroll tax
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tax on wages and salaries to finance Social Security and Medicare costs
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corporate income tax
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the tax a corporation pays on its profits
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excise tax
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tax on the production or sale of a good
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luxury good
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if the demand for the good rises faster than income when income grows
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estate tax
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tax the government levies on the transfer of property when a person dies
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gift tax
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a 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 brought in 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 that are distributed to another level of government for expenditures
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property tax
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tax on tangible and intangible items such as real estate, buildings, furniture, stock, bonds and bank accounts
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tax assessor
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the person who assigns value to property for tax purposes
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payroll withholding statement
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the summary statement attached to a paycheck that summarizes income, tax withholdings, and other 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 some 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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the tax placed on the value that manufacturers add at each stage of production
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flat tax
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proportional tax on individual income after a specified threshold has been reached
