Econ 401

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Horizontal Tax Equity

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The idea that taxpayers with the same amount of income should pay the same amount in taxes (equals treated equally). The tax code should be written so as to ensure equal taxation among equal people.

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Vertical Tax Equity

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the idea that taxpayers with more income should pay more in taxes (unequals treated unequally). How can poorer people afford national defense or other government services? It would be impossible to obtain the revenue from any other source except taxing the wealthy unequally.

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Earned Income

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Income on wages, salaries, and bonuses

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Unearned Income

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Income on dividends, interest, and capital gains

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Adjusted Gross Income

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The tax law measure of the aggregate tax-bearing capacity. Tax law theory says that the taxable base should equal net income not gross receipts. (Total income - adjustments)

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Deductions

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A reduction from gross income that arises due to various types of expenses incurred by a taxpayer.

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Marginal Tax Rate

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Tax rate applied to the next dollar of income.

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Capital Gains

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any positive change in the value of an asset over time. Generally, taxes are only applied when the gain is realized (monetized or liquidated)

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Dividends

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Excess funds which companies give to shareholders.

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Indexation

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automatic inflation adjustment in tax brackets to prevent stealth tax increases.

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Payroll Taxes

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Taxes on wages and salaries

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Taxes on Goods and Services

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These are taxes on sales or consumption.

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General Tax

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applies to all transactions at a level of economic activity except for certain listed exemptions- a sales tax applied to all sales at retail except the food

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Selective Tax

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also called an excise tax applies to only enumerated transactions (e.g. lodging tax applied to room rentals for 30 days or less)

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Single Stage Tax

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only at one state in the production and distribution process can apply at the manufacturer level, at the wholesaler or distributor level

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Multistage Tax

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a tax can apply at every time a transaction occurs: applying at more than one of the following levels: -manufacturer, wholesaler, and distributor level, or retail

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Retail Sales Tax

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a tax added at purchase rather than being included in the price on the shelf and tax thus collected is excluded from gross receipts upon which the tax is levied. this tax is collected by retailer and passed on to state

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Excise Tax

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earmarked tax (a tax whose revenues (by law) are reserved solely for a specific group or usage) eg: motor fuel tax revenue might go into highway associated expenditure

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Value-Added Tax

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Provides an alternative mechanism for taxing consumption. the tax applies to the increment in value at each stage of production and distribution process, rather than at the final (retail) stage. Tax is collected by businesses on their sales of goods and services to their customers

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Property Tax

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a tax conditioned on ownership of property and measured by its assessed value. It includes general property taxes relating to property as a whole, real and personal, tangible or intangible, whether taxed at a single rate or at classified rates; and taxes on selected types of property, such as a motor vehicles or certain or all intangibles

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User Fees

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Revenue derived from government sale of licenses to engage in otherwise restricted or forbidden activitie

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User Charges

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prices charged for voluntarily purchased, publicly provided services that, although benefitting specific individuals or businesses, are closely association with basic government responsibilities

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Fiscal Monopoly

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Utility revenues that the government receives from exclusive sale of a private or toll good or service. These proceeds include revenue from government-operated utilities, state liquor stores, and state lotteries

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Grants

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An assistance award in which substantial involvement is not anticipated between the federal government and the state or local government or other recipient during the performance of the contemplated activity

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Categorial Grants

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Finance specific and narrowly defined programs, usually limited to spending for certain activities, ex constructing a treatment plant or paying salaries of special ed. teachers (include formula, project, and project-formula grants)

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Block Grants

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A type of grant given primarily to general-purpose government unit in accordance to a statutory formula. Can be used for a variety of activities within a broad functional area

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Revenue Sharing

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Distribution of money with little to no restriction on use or function. This revenue is transferred from Federal to state or local, however this practice has been replaced by block grants.

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Mandates

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A constitutional provision, a statute, an administrative regulation or a judicial ruling that places an expenditure requirement on the government.