Taxes and Subsidies

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6 Terms

1
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Ad Valorem Tax

A certain percentage of the price of a good. For example, a 7% sales tax.

2
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Per Unit Tax

A certain dollar amount per unit of good traded. For example, a $0.51 per gallon of gas.

3
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“Levied on”

A tax is said to be levied on the person or firm that has to write the check to the government.

4
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Tax Revenue

The total amount of money received by the government from a tax. Tax Revenue = $ Amount of the Tax * QTAX

5
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Tax Burden

Also called tax incidence. The percentage of the tax that is paid by demanders versus suppliers.

6
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Laffer Curve

A graph illustrating that increasing taxes from zero will cause tax revenue to increase up until some point after which continuing to raise taxes will cause tax revenue to fall.