Econ 1020 U3 Fiscal Policy

Tax

Compulsory financial charge imposed by govt on a taxpayer

Tax cont. Tax base vs tax rate, tax base what is taxed, tax rate is % of the base that is paid as tax by the taxpayer

Appropriation

Amount of money devoted by the govt to a specific purpose or program

Budget Deficit

Where total govt spending is more than total revenue

Budget Surplus

Where total govt spending is less than total revenue

Public debt

Amount of money owed by govt

Income taxes

Taxes on what you earn

Taxes on purchases (sales tax)

Taxes on what you buy

Property taxes

Taxes on what you own

Individual Income taxes

Levied on wages, salaries, & some other forms of income earned by individuals

Payroll taxes

Paid on wages & salaries of employees to finance social insurance programs, such as Social Security (12.4% tax) & Medicare (2.9%)

Sales tax

A consumption tax levied on retail sales of g/s

Excise taxes

Imposed on specific goods or activities, EX; goods; cigarettes, alcohol, soda, gasoline & activities; gambling

Real property tax

Levied on immovable property (land & buildings)

Tangible personal property tax

A tax on property that can be moved, such as vehicles

Estate & inheritance tax

Imposed on the value of an individual’s property at the time of death

Marginal tax rate

Rate of tax you would incur on additional dollar of income

Average tax rate

Tax rate you pay calculated by dividing tax amount by total taxable income

Tax burden

Amount o flax paid as a proportion of total income

Progressive tax

A tax where the average tax burden increases with income

Regressive tax

A tax where the average tax burden decreases with tax income

Public good

A good that is nonrival (consumed by everyone with no decrease in benefits to anyone) and nonexcludable (it costly to prevent anyone from consuming the good)

Discretionary spending

Spending is subject to annual budget cycle, & must be implemented through appropriation bills. Ex: National defense, foreign aid, education

Non-discretionary spending

Authorized by long-term laws and not subject to annual budget cycle. Two main types; 1 Mandatory spending on entitlements: Social Security & Medicare 2 Interest payments on national debt

Budget balance

Govt revenues - expenditures for any given fiscal year.

Public debt

Money owed by any level of government, NOT same as budget deficit

National debt

Federal govt debt

Fiscal consolidation

Process of reducing govt spending and increasing taxes to shrink budget deficit