Unit 6 Econ Vocab

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SIN TAX

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a relatively high tax designed to raise revenue and reduce consumption of a socially undesirable product such as liquor or tobacco.

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TAX LOOPHOLE

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exceptions or oversights in the tax law that allows some businesses to avoid paying taxes. a fairness issue

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INDIVIDUAL INCOME TAX

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the tax on people’s earnings example of a complex tax. the FED government collects about 48% of its revenue from the individual income tax

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SALES TAX

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a general tax levied on most consumer purchases- much simpler. is paid at the time of sale

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BENEFIT PRINCIPLE OF TAXATION

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those who benefit from the government goods and services should pay in proportion to the amount of benefits they receive.

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ABILITY-TO-PAY PRINCIPLE OF TAXATION

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the belief that people should be taxed according to their ability to pay, regardless of the benefits they receive.

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PROGRESSIVE TAX-

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imposes the same % on everyone regardless of income

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MARGINAL TAX RATE

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the tax rate that applies to the next dollar of taxable income, that increases as the amount of taxable income increases

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REGRESSIVE TAX

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a tax that imposes a higher % rate of taxation on low incomes than on high incomes

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PAYROLL WITHHOLDING SYSTEM

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requires an employer to automatically deduct income taxes from an employer’s paycheck and send it directly to the government.

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INTERNAL REVENUE SERVICE

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agency that receives the above amount of money.

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INDEXING

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an upward revision of the tax brackets to keep workers from paying more in taxes just because of inflation

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FICA- 2ND LARGEST SOURCE OF GOV REVENUE

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federal insurance contributions act tax pays for social security and medicare; the FICA tax is a regressive tax social security is partly a proportion tax and partly a regressive tax

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MEDICARE

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the federal health-care program available to all senior citizens, regardless of income.

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EXCISE TAX

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a tax on the manufacture or sale of selected items, such as gas, and liquor- the fourth largest source of income for the federal government

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LUXURY GOOD

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cars, tobacco, if the demand for the good rises faster than the income when income grows

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ESTATE TAX

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the tax the government imposes when someone dies and gives the house to someone in the will. similar to gift tax

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GIFT TAX-

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a tax on donations of money or wealth and it paid by the person who makes the gift

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INTERGOVERNMENTAL REVENUE

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finds collected by one level of government for expenditures.

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PROPERTY TAX

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a tax on tangible and intangible possessions such as real estate, farm animals, automodibles, funiture

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TAX ASSESSOR

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the person who assigns value to property tax purposes

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SALES TAX

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the fourth most important source of local government sales

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ACCELERATED DEPRECIATION

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larger than normal depreciation charges which allow firms to reduce federal income tax payments.

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INVESTMENT TAX CREDIT

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a reduction in business taxes that are ties to investment in new plants and equiptment.

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SURCHARGE

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additional tax above and beyond the base rate

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ALTERNATIVE MINIMUM TAX

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the personal income rate that applies whenever the amount of taxes paid falls below some designated level.

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CAPITAL GAINS

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profits from the sale of an asset held for 12 months.

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VALUE ADDED TAX

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a tax placed on the value that mmanufactures add at each stage of production.

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PER CAPITA

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per person

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PUBLIC SECTOR

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the part of the economy made up of the federal, state, and local government.

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PRIVATE SECTOR

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the part of the economy that is made up of privately-owned businesses and individuals.

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TRANSFER PAYMENTS

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a kind of government expendatures. a payment for which the government recieves no goods or services in return

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GRANT-IN-AID

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a transfer payment one level of government makes

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DISTRIBUTION OF INCOME

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the way income is allocated among famlies, individuals, or other designated groups.

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FEDERAL BUDGET-

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an annual plan outlining proposed revenues and expendatures

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mandatory spending-

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spending that is authorized by the law and doesnt need annual checking by the federal budget

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discretionary spending

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programs that must recieve annual approvals of congress

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FISCAL YEAR

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a 12 month finincial planning period

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APPROPRIATIONS BILL

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allows federal agencies to spend money for specific purposes.

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MEDICADE

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a government insurence program for low income personalle

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BALANCED BUDGET AMENDMENT

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a constitutional amendment that requires requires an annual spending not exceeding revenues

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INTERGOVERNMENTAL EXPENDITURES

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funds that one level of government transfers to another level for spending.

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DEFICIT SPENDING-

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spending in exces of revenues collected.

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FEDERAL DEBT

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the total amount borrowes from investors to finance the government’s deficit spending.

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TRUST FUNDS

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special accounts used to save money such as social security.

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CROWDING-OUT EFFECT

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The higher than normal intreest rates that heavy government borrowing causes.

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ENTITLEMENT

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broad social programs that provide health, nutrition, or income suplment to individuals.