Taxes Flashcards
Incidence
Measure of who really pays the tax
How to calculate tax revenue?
Area of shaded rectangle = width X height
Tax rate
Amount of tax people are required to pay per unit of whatever is being taxed
Administrative costs (of a tax)
Resources used for its collection, for the method of payment, and for any attempts to evade the tax
Benefits principle (of tax fairness)
Those who benefit from public spending should bear the burden of the tax that pays for that spending
Ability to pay principle (of tax fairness)
Those with greater ability to pay a tax should pay more tax
Lump-sum tax
Same for everyone, regardless of any actions people take
Trade-off between equity and efficiency
The system can be made more efficient only by making it less fair and vice versa
Tax base
Measure or value, such as income or property value, that determines how much tax and individual or firm pays
Tax structure
Specifies how the tax depends on the tax base
Income tax
Tax based on individual’s or family’s income
Payroll tax
Tax on the earnings an employer pays to an employee
Sales tax
Tax on the value of goods sold
Profits tax
Tax on firms profits
Property tax
Tax on the value of property
