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18 Cards in this Set
- Front
- Back
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budget deficit
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an excess of government spending over gov reciepts
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budget surplus
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and excess of gov receipts over gov spending
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average tax rate
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total taxes paid dividend by total income
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marginal tax rate
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extra taxes paid on an additional dollar of income
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lump-sum tax
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tax that is the same amount for every person
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benefits principle
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idea that people should pay taxes based on the benefits they receive from gov services
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ability to pay principle
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idea that taxes should be levied on a person according to how well that person can shoulder the burden
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vertical equity
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idea that taxpayers with a greater ability to pay taxes should pay larger amounts
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horizontal equity
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idea that taxpayers with similar abilities to pay taxes should pay the same amount
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proportional tax
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high and low income pay same fraction of income
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regressive tax
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high income pay smaller fraction of their income than do low income
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progressive tax
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high income pay a larger fraction than low income
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positive externality
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situation when a person's actions have a beneficial impact
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negative externality
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bad impact
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social cost
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private + external costs
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internalizing an externality
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altering incentives so that people take into account the external effects of their actions
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coase theorem
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if private parties can bargain without cost over the allocation of resources, they can solve the problem of externalities on their own
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corrective tax
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tax designed to induce private decision makers to take into account the social costs that arise from a negative externality
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