Discovery Unit 6 Glossary Flashcards Preview

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Flashcards in Discovery Unit 6 Glossary Deck (24):
1

excess burden of a tax

Also known as the deadweight loss. Occurs when the best market equilibriums do not occur. One such case is when taxes are applied to a market.

2

allocative efficiency

Occurs when the particular mix of goods being producedラthat is, the specific choice along the production possibilities frontierラrepresents the allocation
that society most desires. That unique combination will provide the greatest level of utility for society as a whole.

3

tax base

Any activity that is taxed.

4

deadweight loss

Also known as the excess burden of a tax. Occurs when the best market equilibriums do not occur.One such case is when taxes are applied to a market.

5

Subsidies

The opposite of taxes: instead of collecting money from producers or consumers for an economic activity, governments can offer payments to producers or
consumers when they engage in a particular economic activity.

6

tax incidence

The way in which a tax payment is divided between buyers and sellers. Also known as the tax burden.

7

tax burden

The way in which a tax payment is divided between buyers and sellers. Also known as the tax incidence.

8

Price elasticity of demand

Measures how much the quantity demanded responds to a change in price.

9

Income taxes

Tax paid based on oneメs income.

10

Social Security

Federal taxes paid based upon oneメs income level.

11

Medicare

Federal taxes paid based upon oneメs income level.

12

Capital gains taxes

Taxes on any profits that you earn based on investments that you have made.

13

Excise taxes

Taxes on purchases of a specific good, such as gasoline, cigarettes, and alcohol. Almost all purchases one makes are charged an excise tax. The excise tax rate varies from city to city and state to state.

14

Corporate income taxes

Corporations pay taxes on all profits they earn. Corporate income taxes are charged at federal, state, and some local levels.

15

Real estate

Taxes that are mostly assessed at the state and local levels based on the fair market value of real estate and other personal property that people might own, such as a car. These taxes vary from city to city and state to state.

16

personal property taxes

Taxes that are mostly assessed at the state and local level based on the fair market value of real estate and other personal property that people might own,
such as a car. These taxes vary from city to city and state to state.

17

Estate taxes

Reflecting Benjamin Franklinメs quote, people are even taxed when they die. The value of the estate inherited by heirs over a certain amount is taxedラin 2014, the value of any estate in excess of $5.3 million was subject to taxation.

18

marginal tax rate

The rate at which an additional dollar earned is taxed.

19

average tax rate

The total tax paid divided by the amount of taxable income.

20

ability to pay principle

States that taxes should be levied on a person according to his or her ability to bear that tax burden.

21

progressive tax

Type of tax system that occurs if higher income taxpayers pay a larger portion of their income in taxes than do low-income taxpayers. Because the federal
income tax is set up so that the marginal tax rate increases as income increases, this tax system is considered to be a progressive tax.

22

proportional tax

Type of tax system that occurs when the tax rate remains constant as the tax base changes. An example of a proportional tax is the Medicare tax. In 2014, the
Medicare tax rate was 2.9% of income (1.45% paid by both the employer and the employee) regardless of income level.

23

regressive tax

A tax in which the tax rate decreases as the tax base increases.

24

benefit principle

The idea that people should pay taxes based on the benefits they receive from the services that those taxes provide.