Taxation Overview

These flashcards cover key terms and concepts related to taxation, including definitions of various tax principles and structures.

Taxes

Mandatory payments to the government.

Importance of Taxation

Taxes make government possible and allow for public goods, infrastructure, and social/economic goals.

Adam Smith’s Four Tax Maxims

Principles for a fair tax system: Equity, Certainty, Convenience, and Efficiency.

Equity

Fairness; the rich should pay a higher percentage of taxes than the poor.

Certainty

Taxes should be clear and understandable to prevent corruption.

Convenience

Taxes should be simple and easy to pay.

Efficiency

Taxes should minimize economic burden and productivity loss.

Ability to Pay Principle

Citizens should be taxed according to their income or wealth.

Benefits Received Principle

Those who benefit from a government program should pay for it.

Tax Equity

The belief that taxation should be fair to all who are taxed.

Deadweight Loss

A loss of productivity or economic well-being with no corresponding gain.

Costs of Compliance

Expenses incurred by taxpayers when preparing income tax forms.

Tax Base

The item, income, or value that is taxed.

Tax Rate

The percentage levied on the taxable income or property.

Proportional Tax

A tax that takes the same share of income at all income levels.

Progressive Tax

A tax that takes a larger share of income as income increases.

Regressive Tax

A tax that takes a smaller share of income as income increases.

Payroll Taxes

Taxes deducted directly from employee paychecks.

Property Taxes

Taxes levied on the value of real property.

Sales Taxes

A tax on the sale of goods paid by the customer at the time of purchase.

Corporate Income Taxes

A tax on the profits of corporations.

Excise Taxes

Taxes on specific goods like alcohol, cigarettes, and luxury items.

Estate Taxes

Taxes levied on the value of an estate after a person dies.

Federal Income Tax

Tax on personal income levied by the federal government.