Chapter 12.5 Flashcards
Corporate income taxes
Taxes on the profits of corporations
Wealth tax
Taxes on the ownership of assets
What is a form of direct taxation that isn’t added to the government’s budget?
Social insurance contributions
Types of indirect tax
General expenditure tax
Excise tax
Customs duties
Proportional taxation
As income increases, the fraction of income paid as taxes remains constant
Progressive taxation
As income increases, the fraction of income paid as taxes increases
Regressive taxation
As income increases, the fraction of income paid as taxes decreases
Why are indirect taxes regressive?
If two people with different incomes buy a good, the amount they pay in tax is the same
What kind of tax system do you use to make after-tax income distribution more equal?
Progressive tax
Marginal tax rate
The tax rate paid on additional income, expressed as a percentage
Average tax rate formula
Tax paid divided by total income
Why might the use of tax as a way to fix income inequality be ineffective?
Might act as a disincentive for people and firms to make more money
Other policies used to reduce income and wealth inequalities and poverty
Investment in human capital
Transfer payments
Targeted government spending on goods and services
Universal basic income
Policies to reduce discrimination
Minimum wages and price controls
Transfer payment
Payments made by the government to individuals specifically for the purpose of redistributing income away from certain groups and towards other groups
Universal basic income
A method intended to provide residents in a country with a sum of money that they would receive regardless of any other income they may have
