microeconomics -- chapter 12

marginal tax rate

the tax rate applied to each additional dollar of income

payroll tax

a tax on the wages tha ta firm pays its workers

corporation

a business that is set up as a separate legal entity

excise taxes

taxes on specific goods

transfer payments

a government payment not made in exchange for a good or service

budget deficit

an excess of government spending over government receipts

budget surplus

an excess of government receipts over government spending

average tax rate

total taxes paid divided by total income

marginal tax rate

the extra taxes paid on an additional dollar of income

lump-sum tax

a tax that is the ssame amount for every person

benefits principle

the idea that people should pay taxes based on the benefits they receive from government services

ability-to-pay principle

the idea that taxes should be levied on a person according to how well that person can shoulder the burden

vertical equity

the idea that taxpayers with a greater ability to pay taxes should pay larger amounts

horizontal equity

the idea that taxpayers with similar abilities to pay taxes should pay the same amount

proportional tax

a tax for which high income and low income taxpayers pay the same fraction of income

regressive tax

a tax for which high-income taxpayers pay a smaller fraction of their income than do low-income taxpayers

progressive tax

a tax for which high-income taxpayers pay a larger fraction of their income than do low income taxpayers