Economics
Proportional tax
everyone pays same rate, average tax is constant city income tax, medicare taxes, flat tax
Individual income tax
federal income tax is progressive
Progressive tax
higher tax rate on higher incomes, like Federal Individual Income Tax
estate tax
is an inheritance tax
User Fees
(BASED ON benefits received PRINCIPLE) 1. entrance charges at national parks and fees ranchers pay when animals graze federal land
four factors that ensure further reform in the federal tax code?
1. tax code is more complex than ever (17000) 2. unexpected events (natural disasters and wars) 3. political change 4. difficult for politicians to give up power
What are the three criteria GOV uses when deciding on a tax?
Equity, efficiency, and simplicity
What is the 2nd most important Federal revenue source?
FICA (social security and Medicare)
Advantages and disadvantages of Value Added Tax
Hard to avoid, widely spread, and easy to collect Virtually invisible, so it's not obvious that VAT is what raised the price of an item (sneaky against tax payers)
Regressive Tax
Imposes a higher % tax rate on low income families than upper, such as sales tax
What are the 1st and 2nd largest categories of state spending?
Intergovernmental expenditures Public Welfare
Reduction in business taxes that are tied to investment in new plants and equipment is called what?
Investment Tax Credit
What are the 3 main attempts to curb federal debt?
Legislation, raising revenue (taxes), and reduced spending
What is discretionary spending?
Must be approved annually, such as National Defense
Who is responsible for preparing the federal budget?
President and OMB
How does the national debt affect the US economy?
Reducing economic incentives, creating a crowding out effect, and redistribution of income
FICA
Social Security and Medicare - these are payroll taxes, aka deducted from check
Examples of transfer payments?
Social security, unemployment comp, welfare
What is the capital gains tax?
Tax imposed by the IRS on profit made by the sale of an asset 12+ months ago
Government spending accounts for what % of GDP?
about 1/3
What is mandatory spending?
considered necessary and continues without annual approval, such as social security
What are the 4 economic Impacts of Taxes
resource allocation, behavior adjustment, productivity and growth, incidence of tax
What are the 4 impacts of government spending on the economy?
resource allocation, redistributing of income, competing with private sector, higher tax burden on citizens
excise tax
sin tax - tax on manufacture items
Customs Duties
tariff on foreign goods
What is a value-added tax
tax on every step of the manufacture process
marginal tax rate
tax rate that applies to the next $ of taxable income
Local property tax
taxes on personal property are seldom collected bc of problem of evaluation
Intergovernmental Revenue
where countries get money, LARGEST SOURCE OF STATE REVENUE