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Tax definition
Required payment to local, state, or national governments
Revenue definition
The income received by a government from taxes and other nontax sources
Progressive tax definition
A tax for which the percentage of income paid in taxes increases as income increases
Proportional tax definition
The percentage of income paid in taxes remain the same at all income levels
Regressive tax definition
The percentage of income paid in taxes, decrease as income increases
Tax base definition
The income, property, good, or a service that is subject to a tax (something that is taxed)
Individual income tax definition
Tax based on a persons earnings
Corporate income tax definition
Tax based on a companies profit
Property tax definition
A tax based on real estate in other property
Sales tax definition
A tax based on goods and services that are sold
Incidence of tax definition
The final burden of tax (person who pays it off)
Mandatory spending is used for things like?
Welfare and Medicare
Discretionary spending is used for things like?
Military spending and education
What are the LIMITS on the government’s power to tax?
the purpose of tax must be for “the common defense and general welfare”
A tax cannot go to a single individual
federal taxes must be the same in every state
the government cannot tax exports ONLY imports
What did the 16th amendment allow for?
Allowed the right for an income tax
What are the features (maxims) of a good tax system according to Adam smith?
Equity (fairness)
Certainty
Simplicity (convenience)
Efficiency
What does equity (fairness?) mean to taxation?
The idea that income should match tax (ability to pay principal)
What does certainty mean to taxation?
The idea that it should be clear when taxes are due, how much is due, and how to pay
What does simplicity (convenience) mean related to taxation
Tax laws should be written, so that both the taxpayer and tax collector can understand them
What does it mean for taxes to be efficient?
The tax should be able to be collected without spending too much time or money
Economist have proposed two different ideas about how to measure the fairness of tax. What are they?
Benefits received principle
Ability to pay principal
Ability to pay principal definition
People should pay taxes, according to their ability to pay (how much they can pay)
Benefits received principle definition
A person should pay taxes based on the level of benefits they expect to receive from the government
The burden of tax falls on the side of the market that is?
Less elastic
For taxes to be fairly equitable, the government must consider?
Tax incidence
Tax incidence definition
The burden of the tax between consumers and producers
Why do some advocate for proportional taxes?
Seems more fair because everyone pays an equal share
Simple to calculate an easy to collect
What do critics think about proportional taxes?
They are not fair, because the rich and the poor pay the same percentage
Why do some advocate for progressive taxes?
It is fair because it places a greater burden on the wealthy
What do critics say about progressive taxes?
Punishes people who are accumulating more wealth
Does not encourage people to invest and save
What is the gas tax regressive?
The percentage of income is less to someone who makes more money compared to one who is “poor”
What taxes is the federal government collect?
individual income taxes
Corporate income taxes
Social Security, Medicare, and unemployment taxes
Estate and gift taxes
Marginal tax rate definition
The tax rate applied to the last dollar of taxable income earned
Why is your average tax rate always higher than your marginal tax rate?
It takes into account all the different tax brackets and tax rates that apply to your income
Average tax rate definition
The total amount of taxes paid divided by taxable income. It is the percentage of your income that you pay in taxes.
What is the pay as you earn system?
Individuals usually pay most of their income taxes as they earn income
How do employers help collects taxes?
By withholding money from your paycheck based on an estimate of how much you owe in federal income taxes for the year
Taxable income definition
A persons total income minus exemptions and deductions
Tax returns are due to international revenue service by?
April 15th
Are corporate income taxes progressive, regressive, or proportional
Progressive
Excise tax definition
A tax imposed on specific goods or services, such as gasoline, tobacco, and alcohol. It is typically included in the price of the product or service and is paid by the consumer.
Estate tax definition
A tax on the total value of the money and property of a person who has died
Gift tax definition
A tax on the money or property that one living person gives you another
What is the goal of a gift tax?
To prevent people from avoiding the federal estate tax by giving away property or money before they die
How much money can you receive in a gift before paying taxes on it?
17,000 in a single year
Import taxes (tariffs)
Taxes placed on imported goods
Mandatory spending definition
Government spending that is required by law and cannot be changed without a change in the law. It includes programs like Social Security, Medicare, and Medicaid, which provide benefits to eligible individuals regardless of the amount of funding that is available.
Medicare definition
A federal health insurance program for people who are 65 or older, or have certain disabilities
Medicaid definition
Is a joint federal-state program that provides health coverage to people with low incomes
Discretionary spending definition
Government spending that is not required by law and can be changed or eliminated through the annual appropriations process. It includes funding for programs like defense, education, and transportation, and is subject to the discretion of Congress and the President.
What are considered “other” mandatory entitlement programs
food stamps in child nutrition programs
Retirement, benefits, and insurance for federal workers
Veterans pension
How to state and local governments manage their money?
In accordance with priorities set by elected local government officials
Budgets are created, and taxes are collected just like federal governments
Where are state taxes spent?
Education
Public safety
Public welfare
Highway and transportation
Arts and recreations
Administration
Taxes were the main issue that sparked during what?
The American revolution
Note 
Flashcard (98)