INCOME TAX CHAPTER 1

AD VALOREM TAXES

TAX BASED ON THE FAIR VALUE OF PROPERTY (EX: TRANSFER AND GIFTS TAXES)

AVERAGE TAX RATE

TOTAL TAX / TAXABLE INCOME

CERTAINTY

TAXPAYERS SHOULD BE ABLE TO DETERMINE WHEN, WHERE, AND HOW MUCH TAX TO PAY.

CONVENIENCE

TAXPAYERS SHOULD FIND IT EASY TO PAY THEIR TAXES AND THERE SHOULD NOT BE ANY COMPLICATIONS OR HARD STEPS

DYNAMIC FORCASTING

THE PROCESS OF FORECASTING TAX REVENUES THAT INCORPORATES INTO THE FORECASSE HOW TAXPAYERS MAY ALTER THEIR ACTIVITIES IN RESPOND TO A TAX LAW CHANGE

EARMARKED TAXES

TAXES IMPOSED FOR A SPECIFIC PURPOSE (EDUCATIONAL TAX ETC)

ECONOMY

TAX SYSTEM SHOULD MINIMIZE ITS COMPLIANCE AND ADMINISTRATION COSTS

EFFECTIVE TAX RATE

TOTAL TAX / TOTAL INCOME

EMPLOYEMENT TAXES

TAXES PAID BY EMPLOYEES SUCH AS SOCIAL SECURITY AND MEDICARE

EQUITY

A TAX SYSTEM IS CONSIDERED FAIR IF THE TAX IS BASED ON THE TAXPAYER’S ABILITY TO PAY; TAXPAYERS WITH MORE INCOME PAYS MORE TAX

ESTATE TAX

TAX PAID ON ESTATE

EXCISE TAXES

TAXES LEVIED ON RETAIL SALE OF A PARTICULAR PRODUCT. DEPENDS ON A QUANTITY PURCHASES RATHER THAN A MONETARY VALUE

EXPLICT TAXES

TAXES DIRECTLY IMPOSED BY THE GOVERNMENT

FLAT TAX

EUQUAL AMOUNT OF TAX RATE THROUGHT THE TAX BASE. EXAMPLE: CORPORATE INCOME TAXES PAY 21% FLAT RATE.

GIFT TAX

TAX PAID ON A GIFT

GRADUATED TAXES

TAX BASE IS DIVIDED INTO BRACKETS AND EACH BARCKET IS TAXED WITH DIFFERNT RATE

HORIZONTAL EQUITY

TAXPAYERS IN THE SIMILAR SITUATION PAYS THE SAME TAX

IMPLICIT TAXES

TAXES THAT ARE DIRECTLY NOT CHARGED BY THE GOVERNMENT. FOR EXAMPLE: MUNCIPAL BONDS; THEY GIVE LOWER INTEREST THAN CORPORATE BUT YOU DON’T PAY TAXES ON THEM. THAT DIFFERENCE IS IMPLICT TAX

INCOME EFFECT

PREDICTS THAT WHEN TAXPAYERS ARE TAXED MORE, THEY WILL WORK HARDER TO GENERATE THE SAME AFTER-TAX DOLLARS

INCOME TAX

TAX BASE IS INCOME. COLLECTED BY FEDERAL AND/OR STATE AND LOCAL GOVERNMENT

MARGINAL TAX RATE

A RATE WHICH IS NEXT TO A DOLLAR IS TAXED