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16 Cards in this Set
- Front
- Back
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The way the burden of tax is distributed among economic units (consumers, producers, employers, and so on). The actual burden does not always fall on those assigned to pay the tax |
Tax incidence |
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The level or quantity of an economic activity that is taxed. Higher tax rates reduce the level of the tax base because they make the activity less attractive |
Tax base |
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The per-unit amount of the tax or the percentage rate at which the economic activity is taxed |
Tax rate |
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The loss of gains from trade to buyers and sellers that occurs when the tax is imposed. This imposes a burden on buyers and sellers over and above the actual payment of the tax |
Deadweight loss |
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Another term for deadweight loss. It reflects the losses that occur when beneficial activities are forgone because they are taxed |
Excess of burden taxation |
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Result of deadweight loss to sellers includes an indirect cost imposed on the people who supply ________ to the industry |
Resources |
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Economic analysis indicates that the actual burden of tax - or the split of the burden b/w buyers and sellers - does not depend on whether the tax is statutorily placed on the buyer or seller |
Actual vs statutory incidence |
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The incidence of a tax depends on the responsiveness of buyers and sellers to a change in price. |
Elasticity of the tax incidence |
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Tax liability by taxable income. % of income paid in taxes |
Average tax rate |
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ATR = ? / ? |
tax liability / taxable income |
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A tax in which the average tax rate rises with the income. People w/ higher incomes will pay higher percentages of their income to taxes |
Progressive tax |
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A tax in which the average tax rate falls w/ income. People w/ higher income will pay a lower percentage of income on taxes |
Regressive tax |
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The additional tax liability a person faces divided by his or her additional taxable income. It is the percentage of an extra dollar of income earned that must be paid in taxes - RELEVANT IN PERSONAL DECISION MAKING |
Marginal tax rate |
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MTR = ? / ? |
Change in tax liability / change in taxable income |
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A curve illustrating the relationship b/w the tax rate and tax revenues. Tax revenues will be low at both very high and very low tax rates |
Laffer curve |
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A payment the gov. makes either to the buyer or the seller, usually on a per unit basis when a good or service is purchased or sold |
Subsidy |
