Final exam Flashcards
(23 cards)
marginal tax rate
your marginal tax rate is the rate at which the last or next unit of your income is taxed, it applies to the highest portion or bracket of tax payers income
average tax rate
total tax paid divided by your addition income (taxable income), it represents the total portion of income paid in taxes, it provides a measure of the overall tax burden on your income
does increasing amt of family member per house hold exemptions make the tax system more or less progressive
increasing family member exemptions would make the tax system more progressive
does flattening of the marginal tax rate schedule make the tax system more or less progressive
flattening of the marginal tax rate tends to make the tax system more regressive becuase two families pay the same amount of marginal tax rate even if one makes significantly more or less than another
is getting rid of tax exemptions and deductions more or less progressive
getting ride of exemptions and deductions is seen as more progressive bc exemptions and deductions disporportionatly benefit the wealthy by decreasing their marginal tax rate
haig simions definition
any benefits that increase the ability of an individual to consume should be included in taxable income (most medical expenses)
offering tax breaks for public goods and provisions
allowing tax deductions for contributions to public goods reduces price of providing goods relative to price of private consumer goods, this mechanism tends to offset natural tendency of private markets to under provide public goods but does not assure public goods will be efficiently provided because deductions are more valuable the higher the tax payers marginal tax rate, public goods most preferred by high earning tax payers will be ones provided by this system so no mechanism assuing public goods preferred by most tax payers are provided as opposed to wealthier tax payers
measures of vertical equity
progressive, proportional, regressive
progressive taxes
tax system in which average tax rates rise with income
proportional taxation
tax system in which effective avg tax rates do not change with income so all tax payers pay the same proportion of their income in taxes
regressive tax system
tax systems in which effecive avg tax rates fall with income
haig simons definition promotes what type of equity
horizantal equity by treating all income equally
- deductions to account for expenses not associated with desired consumption
Deductions: property, medical expenditures, state and local payments
tax deductions
amt tax payers can reduce their taxable income by through spending on things like charitable donations or home mortage interest
Tax credits
allow tax payers to reduce amt they owe to the govt
marriage tax
large deductions for married couples relative to single tax filers would eliminate marriage tax, not deductions make system of family based taxation neutral
