econ ch.9 Flashcards
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incidence of a tax
or the final burden of the tax-can be predicted with the help ofsupply and demand analysis
sin tax
a relativiely high tax designed to raise revenue and reduce consumption of a socaillbly undesirable product such as liqour or tabacco
taxloopholes
exceptions or oversights in the tax law that allow some people and businesses to avoid paying taxes
individual income tax
the tax onpeoples earnings
sales tax
a general tax levied on most consumer purchases
criteria for effective taxes is?
simplicity and efficiency
benefit principle of taxation
those who benefit from government goods and services should pay in porportion to the amount of benefits they recieve
ability to pay principle of taxation
the belief that people should be taxed according to their ability to pay, regardless of the benefits they recieve
porportional tax
imposes the same tax on everyone, regardless of income
average tax rate
total taxable income divided by the total income is constant regardless of income
progressive tax
tax imposes a higher % rate of taxation on persons with higher incomes
marginal tax rate
tax rate that applies to the next dollar of taxable income, that increases as the amount of taxable income increases
regressive tax
a tax that imposes a higher percentage rate of taxation on low incomes than on high incomes
payroll witholding system
a system that requires an employer to automatically deduct income taxes from an employers pay check and send it directlyto the government
internal revenue service IRS
branch of the US treasury department in charge of collecting taxes
tax return
an annual report to the IRS summarizing total income, deductions, and taxes
excise tax
a tax on manufacture or sale of selected items, such as gasoline and liqour
FICA
federal insurance contributions act tax levied on both employers and employees to pay for socail security and medicare
medicare
federal health program available to all senior citizens regardless of income
payroll taxes
tax on wages and salaries to finance socail security and medicade costs
indexing
is an upward revision of the tax brackets to keep workers from paying more in taxes just because of inflation
corporate income tax
the tax a corporation pays on its profits
excise tax
a tax on the manufacture or sale of selected items, such as gasoline and liqour
luxury good
an economic product (or service)
