Macroeconomics Tax Systems

The idea that taxes should be levied on a person according to how well that person can shoulder the burden

Ability-to Pay Principle

The idea that people should pay taxes based on the benefits they receive from the government

Benefits-received Principle

Tax laws affect

Both efficiency and equity

An excess of government spending over government receipts

Budget Deficit

Taxes paid by companies on their profit

Corporate Income Tax

Two objectives of policy makers in designing a tax system

Efficiency and Equity

Taxes paid on specific goods like gasoline, cigarettes, alcoholic beverages, etc..

Excise Tax

The deliberate change in government spending programs or taxes to stimulate or slow down the economy

Fiscal Policy

An excess of government receipts over government spending

Government Surplus

The idea that taxpayers with similar abilities to pay taxes should pay the same amount

Horizontal Equity

the idea that two taxpayers in the same economic circumstances should pay the same level of taxes is known as the ...

Horizontal equity principle

What are the two types of taxes that working individuals pay on their earnings?

Individual income tax and social insurance taxes

Public schools get most of their operating funds from..

Local property tax

A tax that is the same amount for every person regardless of earnings or any actions that the person might take, also considered efficient taxes because they do not influence a person's decision on how much to work.

Lump-sum tax

Tax law that treats a married couple as a "single" tax payer

Mariage and Tax Liability

Taxes paid by an individual on their income

Personal Income Tax

If, as your taxable income decreases, you pay a smaller percentage of your taxable income in taxes, then the tax is

Progressive

A tax for which high-income taxpayers pay a larger fraction of their income than do low-income taxpayers

Progressive Tax

A tax for which high-income and low-income taxpayers pay the same fraction of income

Proportional Tax

A tax for which high-income taxpayers pay a smaller fraction of their income than do low-income taxpayers

Regressive Tax

The Federal Insurance Contributions Act

Social Security Insurance Tax

Total taxes paid divided by total income x 100

The Average Tax Rate

The % paid in taxes on an additional dollar of income x 100

The Marginal Tax Rate

Gasoline taxes that are typically used for highway construction and maintenance are consistent with which principle of taxation?

The benefits-recieved principle

The idea that taxpayers with a greater ability to pay taxes should pay larger amounts

Vertical Equity

A personal exemption refers to ...

an amount representing basic living expenses that can be subtracted from income

The "ability-to-pay" principle of taxation is the normative idea that ...

an equitable tax system is one in which high income individuals should bear a greater burden of taxes than low income individuals

An efficient tax system is one that..

imposes small deadweight losses and small administrative burdens

Exemptions and deductions are used by ....

taxpayers to reduce the amount of income subject to tax