ECON CHAPTER 19-23
if women are not allowed to vote or inherit wealth but men are, this is an example of
an inequality trap
tax revenue formula
average tax rate x tax base
an annual income of less than $29,000 is
below the poverty threshold
vertical equity can be determined by comparing the
effective tax rate of the taxpayer with the highest nominal income to the effective tax rates of taxpayers with lower nominal incomes
When compared to those in poor countries, poor people in the US receive
far more goods and services
in-kind income
goods and services received directly (not via a market transaction)
if Luis makes $50,000 per year as a computer programmer and pays $6,000 in taxes while Hector makes $50,000 per year as a roofing contractor and pays $7,000 in taxes, this is an example of
horizontal inequity
progressive
imposes higher tax rates on high income than on low incomes
severe poverty
income of less than $2 per person. Nearly 2.4 billion of the 7 billion people worldwide
extreme poverty
income of less then $1.25 per day per person. over 1 billion of the 7 billion people worldwide
the official poverty threshold in the united states is an annual income of
less than three times the cost of a "minimally adequate" diet
the granting of small, unsecured loans to small businesses and entrepreneurs is known an
microfinance
When the census bureau counts the number of poor Americans, it counts
only money income
horizontal equity
people with equal incomes should pay equal taxes
vertical equity
people with higher incomes should pay more taxes than people with lower incomes
if the percentage of income paid in taxes increases as income rises, then the tax system is
progressive
two general approaches to global poverty reduction
redistribution of incomes and economic growth
nominal tax rates
taxes paid divided by taxable income
effective tax rate
taxes paid divided by total income
wealth
tends to be distributed less equally than income
personal income
the amount earned and received by households before taxes are paid
gini coefficient
the area under the diagonal of the Lorenz curve
the higher the Gini coefficient
the greater the inequality of income
wealth
the market value of assets owned at a point in time
proportional
the percentage of income going to taxes is the same no matter what the income
social security payroll tax
the second-largest source of federal tax revenue
sales and property taxes are regressive because
the tax rate falls as incomes rises
marginal tax rate
the tax rate imposed on the last (marginal) dollar of income--increases as incomes rise
tax incidence
where the real burden of a tax falls
flat tax
-a single-rate tax system -replaces the current system of multiple tax brackets -eliminates all deductions, tax credits, and most exemptions (loopholes)
sales tax incidence
-at lower incomes, earners spend all of their income, which is subject to sales tax -at higher incomes, earner do not pay sales tax on income not spent, but saved
property tax incidence
-income going to housing is higher for low-income earners, who primarily rent rather than own -property tax is reflected in higher rents
the benefits of a flat tax include
-simplicity -only one tax bracket -no deductions or exemptions
equity
a more equal distribution
wealth
a stock of potential purchasing power
