Taxation Bridging Class Review

Flashcards covering the fundamental principles, classifications, and components of taxation as presented in the Bridging Class of 2027 lecture.

Power of Eminent Domain

The power of the State or those to whom the power has been delegated to take private property for public use upon paying the owners a just compensation to be ascertained according to law.

Police Power

The power of the State to enact such laws in relation to persons and property as may promote public health, public morals, public safety and general welfare of the people.

Taxation

The power by which the sovereign raises revenue to defray the necessary expenses of the government; also the process or means by which the sovereign, through its lawmaking body, raises income.

Revenue Purpose

The principal (primary) purpose of taxation which is to raise revenue for governmental needs.

Compensatory Purposes

A secondary purpose of taxation aimed at reducing excessive inequalities of wealth, maintaining high levels of employment, and controlling inflation.

Regulatory Purpose

A secondary purpose of taxation that implements the police power of the State to promote the general welfare.

Lifeblood Theory

A theory asserting that taxes are essential to the government's existence; without revenue, the state would be paralyzed and unable to function or provide basic services.

Benefits Received Theory

The basis of taxation characterized by the reciprocal duties of protection and support between the State and its inhabitants.

Ability-to-Pay Theory

The concept that taxpayers should contribute to the government in exact proportion to their respective abilities to pay, causing less relative hardship for higher earners.

Strict Construction of Tax Impositions

The principle that tax laws imposing burdens or penalties must be interpreted strictly against the government and in favor of the person being taxed.

Liberal Construction of Tax Exemptions

The principle that exemptions, deductions, and refunds are construed strictly against the taxpayer and liberally in favor of the state.

Prospectivity of Tax Laws

The rule that tax laws govern only transactions that occur after the law is enacted to prevent retroactive taxation.

Public Purpose

An inherent limitation stating that taxes can only be levied to support the state, promote community welfare, or fund recognized government objectives, not for private purposes.

International Comity

An inherent limitation where one state generally may not tax the property, income, or diplomatic representatives of a foreign government out of mutual respect.

Fiscal Adequacy

A principle of a sound tax system requiring that tax revenues be sufficient to meet government expenditures and public needs without creating constant deficits.

Theoretical Justice (Equality)

A principle of a sound tax system where the tax burden is proportionate to the taxpayer's ability to pay to ensure the system is fair and equitable.

Administrative Feasibility

A principle of a sound tax system stating that tax laws must be clear, easy to understand, and capable of being effectively enforced with the least inconvenience.

Direct Tax

A tax which is demanded from the person who also shoulders the burden of tax and cannot shift it to another, such as income tax or estate tax.

Indirect Tax

A tax which is demanded from one person with the expectation and intention that the burden will be shifted to another, such as value-added tax.

Specific Tax

A tax of fixed amount imposed by the head or number, or by some standard of weight or measurement, requiring no assessment other than a listing.

Ad Valorem Tax

A tax of fixed proportion of the value of the property which requires the intervention of assessors or appraisers to estimate value.

Personal/Poll/Capitation Tax

A tax of a fixed amount imposed on individuals residing within a territory without regard to their property or occupation, such as community tax.

Excise Tax (Classification)

Any tax that is not a poll tax or a property tax, specifically a tax on the exercise of certain rights or privileges.

Proportional Tax

A tax based on a fixed percentage of the amount of the property, receipts, or other basis to be taxed.

Progressive Tax

A tax where the rate increases as the tax base or bracket increases.

Toll

A demand of proprietorship paid for the use of another person's property, with an amount based on the cost of construction or maintenance.

Special Assessment

A levy on land only, based wholly on special benefits to the property assessed rather than the necessities of government.

License Fee

An imposition for regulation involving the exercise of police power, where the amount is limited to the necessary expenses of regulation.

Tax Exemption

A grant of immunity to particular persons or corporations from a tax that others in the same taxing district are generally obliged to pay.

Tax Avoidance

The legal practice of minimizing a tax bill by using approved provisions within the tax code, such as deductions or tax credits.

Tax Shifting

The economic process where the entity legally responsible for paying a tax transfers the actual financial burden to another party.

Forward Shifting

A type of tax shifting where the burden is transferred from a factor of production through distribution until it settles on the ultimate purchaser or consumer.

Tax Evasion

The illegal and deliberate practice of not paying or underpaying tax liabilities involving active deception like underreporting income or concealing assets.

Best Evidence Obtainable

The power of the CIR to assess tax liability based on available clues if a taxpayer fails to file a return or files a fraudulent one.

Compromise and Abatement

Administrative remedies where the CIR can compromise tax payments in cases of doubtful validity of assessment or financial incapacity of the taxpayer.