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25 Cards in this Set
- Front
- Back
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Ratio of taxes paid to income
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Average tax rate
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The proportion of the last dollar of income taxed by the government
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Marginal tax rate
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A tax system under which an individual's average tax rate increases with income
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Progressive
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A tax system under which an individual's average tax rate is the same at each level of income
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Proportional
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A tax system under which an individual's average tax rate decreases with income
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Regressive
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Balance and fairness across the tax system
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Tax Equity
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Taxes should be levied on the basis of taxpayers ability to pay taxes (measured by income wealth)
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Ability-to-pay principle
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Equal income --> equal taxes
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Horizontal equity
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Unequal income --> Unequal taxes
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Vertical equity
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Taxes should be levied on the basis of government services funded by tax(es)
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Benefits derived principle
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Example - personal income taxes
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Progressive taxes
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Example - Sales taxes, payroll taxes
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Proportional taxes
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Example - gasoline tax
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Benefits derived principle
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Those who are legally liable to pay the tax (statutory incidence) may not be the ones who bear the incidence (burden) of the tax
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The incidence of (Excise) taxes
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Total income from all taxable sources less certain expenses incurred in earning that income
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Adjusted gross income (AGI)
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Certain expenses that may be subtracted from adjusted gross income in the computation of taxable income
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Allowable deductions
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The amount of income subject to tax
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Taxable income
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A subtraction from tax liability (as opposed to a subtraction from taxable income)
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Tax credit
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Money value on the net increase in an individual's power to consume during a period
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Haig-Simons (H-S)
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What items are included in Haig-Simons
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-Income, Wages and salaries, business profits, rents, dividends and interest
-Employer pension contributions and insurance purchases -Transfer payments - (SS retirement benefits, unemployment compensation, and welfare) -Capital gains |
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One important business expense is labor, and compensation paid to workers (wages and benefits) is excluded from taxable income
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Employee compensation deducted
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Corporation tax is Proportional, Regressive, or Progressive?
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Progressive
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What are the tax reform proposals of corporate tax?
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Full integration
Dividend relief |
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Each stockholder incurs a tax liability on his or her share of the earnings of a corporation, whether or not the earnings are distributed
Owners of stock would be taxed on their share of corporate income as if they were partners |
Full integration
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Eliminate double taxation while still maintaining the corporation tax as a separate system
Dividends are taxed only once, either by allowing a deduction at the corporate level or an exclusion at the individual level |
Dividend Relief
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