Econ Ch.19 Taxes

Flat tax

A single-rate tax system, replaces the current system of multiple tax brackets, eliminates all deductions, tax credits and most exemptions (loopholes)

regressive

A tax is ___________ if its average rate declines as income increases

Flat

A tax is ___________ if its average rate remains the same regardless of the size of income

less

Flattening out the marginal tax rates would make the system _____ progressive

In-kind income

Goods and services received directly (not via market transaction)

reduce

Higher marginal tax rates tend to ________ incentives

progressive

If the tax rate on added income rises as income rises, the system is?

Sales and property taxes

Major source of revenue for state and local government, regressive tax rates

Horizontal equity

People with equal incomes should pay equal taxes

Vertical equity

People with higher income should pay more taxes than people with lower incomes

Marginal

Progressive taxation is achieved by applying higher ________ tax rates

increase

Progressive/ marginal tax rates __________ as income increases

higher

Property tax is reflected in_________ rents

Efficiency

Rewards producers based on their value in production

more

Steeply rising marginal tax rates would make the system ________ progressive

Effective

Tax rates that are taxes paid divided by total income

Effective tax rate

Taxes paid divided by total income

Progressive

Taxes that imposes higher tax rates on high incomes than on low incomes

Tax elasticity of supply

The % change in quantity supplied divided by the % change in tax rate equals?

Personal income

The amount earned and received by houeseholds before taxes are paid

Progressive

The federal income tax is ____________

greater equity

The government strives for ______________

Efficiency

The market strives for ___________

Regressive taxes

The tax rate falls as income rises, imposes a proportionally larger burden of the tax on lower-income earners

Proportional

The tax system as a whole is nearly ______________

Marginal tax rate

Type of progressive tax rate that is imposed on the last dollar of income, increases as income rises

less

Wealth tends to be distributed _________ equally than income

Vertical and horizontal

What are the 2 equity considerations for the federal income tax?

Sales and property taxes, payroll taxes

What are the 3 types of regressive taxes?

Reduce inequality

What is the goal of progressive tax rates?

Progressive

What tax system is US?

Tax incidence

Where the real burden of a tax falls

Sales

________ tax is the primary source of revenue for state governments

equity

a more equal distribution

Nominal

tax rates that are taxes paid divided by taxable income

Nominal tax

taxes paid by taxable income

Progressive tax system

taxes the "rich" heavily and distributes the proceeds to the "poor".

Quintile

20 % of the total number

Payroll taxes

2nd largest source of federal revenue, workers pay this tax on earnings up to 117,000, regressive tax, higher income earners pay no tax on income above that level, half of the tax is paid by employers

Higher

At _________ incomes, earners do not pay sales tax on income not spent, but saved

Lower

At __________ incomes, earners spend all of their income, which is subject to sales tax

Quintiles

fifths or 20% of households, divide households by this or according to their income

low

for property taxes, income going to housing is higher for _____-income earners, who primarily rent rather than own