Income Tax

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A criterion of tax fairness that people with different anounts of wealth or different amounts of income should pay different amounts of taxes. Wealth may include assets and property such as houses, cars, stocks, bonds, savings accounts or valuables. Income includes wages, rents, interst, profits, or other payments

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Ability to Pay

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total income reduce by certain adjustments such as the IRA deduction and the deduction for alimony paid.

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Adjusted Gross Income

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A criterion of tax fairness that people should pay taxes in rouh proportion to the benefits they receive from government goods and services.

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Benefits Received

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Taxes levied on businesses by federal, state, or local governments. These may include, in addition to corporate income taxes on earnings and profits, unemployment insurance, workmen's compensation, contributions to social sercurity, and Medicare insurance.

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Business Taxes

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A direct reduction of the tax owed. Credits may be allowed for purposes such as child care and the earned income credit for low-income taxpayers.

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Credits

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A person who relies on someone elso for support. A dependent generally may not be the taxpayer or his or her spouse. A taxpayer may claim an exemption for a dependent if the dependency tests are met.

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Dependent

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A tax that cannot be shifted to others. The federal income tax is a good example of a direct tax.

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Direct Tax

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Ordinary dividends are a corporation's distributions to its shareholders from its earnings and profits.

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Dividends

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Includes wages, salaries, tips, and net earnings from self-employment and other income recieved for personal services.

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Earned Income

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A refundable credit for low-income workers with children. This credit may be paid to the worker even if no income tax was withheld from the worker's pay. To receive the earned income credit, a taxpayer must file a tax return.

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Earned Income Credit

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Taxes on the sale or use of specific products or transactions.

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Excise Taxes

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Free from federal income tax withholding requirements by meeting certain income, tax liabilty, and dependency criteria.

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Exempt (from Withholding)

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Tax law provides for a set amount which taxpayers can claim for themselves, their spouses, and eligible dependents. The total of these amounts is subtracted from adjusted gross income before any tax is computed on the remaining income.

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Exempt (from Tax Liability)

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To file means to mail or otherwise convey to a regional IRS Service Center the appropriate IRS form(s)-the return-on which a taxpayer has entered information about income and tax laibility.

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File a Return

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Based on taxpayer's martial status and other factors, teh filing status determines the tax bracket and rate at which income is taxed.

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Filing Status

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A form that helps an employer determine how much to withhold from an employee's paycheck for federal income tax purposes.

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Form W-4 (Employee's Withholding Allownace Certificate)

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The strict constitutional steps (involving Congress and the president that a propsed tax must pass through before it becomes law.

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Formal Tax Legislation Process

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Money, goods, and property you received that must be included in taxable income.

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Gross Income

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The concept that people in the same income group should pay the same amount of taxes. "Equals should be taxed equally."

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Horizantal Equity

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Taxes on income, both earned and unearned. Income taxes can be levied both on individuals and businesses.

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Income Taxes

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A tax that van be shifted to others. The one who pays the tax to the government may be able to shift it to others. Business property taxes are examples of indirect taxes.

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Indirect Taxes

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Individuals and interest groups expressing and promoting their opinions about tax legislation.

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Informal Tax Legislation Process

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Income received from savings accounts or from lending money to someone else.

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Interest Income

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Taxes collected from employers and employees to finance specific programs: levied on earned income such as wages, salaries, and self-employment earnings.

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Payroll Taxes

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A tax based on the amount of taxable income that people receive annually. Taxable income is less than total income because of exemptions and tax deductions.

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Personal Income Tax

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A tax that takes a larger percentage of income from high-income groups than form low-income groups.

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Progressive Tax

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Taxes on property, especially real estate, and also boats, automobiles (often paid along with license fees), recreationcal vehicals, and business inventories.

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Property Taxes

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A tax that takes the same percentage of income from all income groups.

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Proportional Tax

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A public good is one that cannot be withheld form those who dont pay for it, and one that may be "consumed" by one person without reducing the amount of the product available for others.

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Public Goods and Services

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A government-designated area that is declared in need of restoration and revitalization. To encourage restoration, tax reductions may be available.

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Redevelopment

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Taxes on retail products, based on a set percentage of retail cost.

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Sales Tax

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A tax that takes a larger percentage of income form low-income groups than from high-income groups.

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Regressive Tax

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A form on which taxpayers list specific sources of income, or specific expense for which they claim deductions or credits.

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Schedule

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An amount, fixed aby law and based on filing status and age, which taxpayers may deduct from their adjusted gross income before tax is determined.

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Standard Deduction

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Taxes on products imported from foriegn countries.

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Tariff

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Amounts, based on certain expenditures, that a taxpayer can deduct from taxes owed.

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Tax Credits

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A person's or a business's expenses that can be deducted in determining taxable income.

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Tax Deductions

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A part of a person's total income on which no tax is imposed.

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Tax Exemptions

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The amount of tax that must be paid.

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Tax Liability

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The process that occurswhen a tax that has been levied on one person or group is in fact paid by others.

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Tax Shift

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Money that an empluer takes from an employee's paycheck and that is used to pay part or all of the employee's taxes.

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Tax Withholding

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The income on which tax is computed.

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Taxable Income

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Required payments of money to governments that are used to provide public goods and services for the benefitof the community as a whole.

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Taxes

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Taxes on economic transactions, such as teh sale of goods and services. Such taxes can be based on a set % fo the sales value orthey can a be set amount on physical quantities.

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Transaction Taxes

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The concept that people in diiferent income groups should pay different amounts of taxes, or different % of the incomes as taxes.

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Vertical Equity

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A system of compliance that relies on individual citizens to report their income freely and voluntarily, calculate their tax liability correctly, and file a tax return on time.

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Voluntary Compliance

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Money that employers withhold from employee's paychecks. This money is deposited for the government.

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Withholding

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Claimed by an employee on Form W-4. An employer uses the number of allowances claimed, together with income earned and marital status to determine how much income tax to withhold from wages.

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Withholding Allowance