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