Term
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Definition
| revenue losses attributable to provisions of the tax law |
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Term
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Definition
| the tax bracket for particular income |
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Term
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Definition
| total tax paid as a percent of total income |
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Term
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Definition
| Increased tax percent as well as increased rate of taxation - reduces the effect of income inequality (i.e. 1% of $20K, 2% of the next $30K, and 3% of the next $10K) |
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Term
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Definition
| Rate decreases as income increases (i.e. OASDI is capped at 7.65% for first $118,500 of income) |
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Term
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Definition
| A tax cut for some requires offset in revenue for others |
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Term
What are the 4 Sources of Federal Revenue?
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Definition
- Individual Income Tax (progressive)
- Individual Payroll Tax (regressive)
- Corporate Income Tax
- Excise and other (i.e. on products)
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Term
| Briefly explain the history of tax structure? |
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Definition
- Individual tax used to be unconstitutional
- International Tariffs funded most of the federal gov't until the Civil War
- Gov't was also funded by various transactions
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Term
| Briefly describe the 3 elements of the current tax structure |
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Definition
- Tax Basis - What is being taxed
- Tax Expenditure - what special provisions might you consider (exemptions, exclusions, deductions, etc.)
- Tax Rate (progressive, regressive, or flat)
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Term
| What are the 4 Tax Design Criterion? |
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Definition
- Amount collected: Fiscally neutral (net effect of total revenue is 0) OR Buoyancy (raises with the rate of population/usage growth)
- Collectability: Low cost to collect AND a High probability to collect
- Public Perceptions - public must view it as fair and valuable
- Transactional Fairness - relative gains and losses from a policy shift
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Term
| What are the different types of tax expenditures? |
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Definition
- Exclusion - don't have to pay taxes (medicare benefits, employer provided health care, public assistance)
- Exemption - not taxed (military housing allowance, income earned in combat zone, interest on municipal bonds)
- Deduction - how much can be subtracted from the amount you owe (charitable contributions, home mortgage interest, property taxes paid)
- Earned income tax credit - gives money back (child tax credit, adoption tax credit)
- Preferential Rate - taxed differently (taxes on capital gains and dividends)
- Deferral - pay taxes later (Retirement account contributions)
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Term
| What is the policy behind a progressive tax? |
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Definition
| To reduce income inequality |
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Term
| What is the policy behind a flat tax? |
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Definition
| To encourage certain values; can be used when taxing specific items is too complex |
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Term
| What is the policy behind a regressive tax? |
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Definition
| capped at a consumption level (i.e. pay less, use less) |
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Term
| How is tax code used as public policy? |
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Definition
| It can be used to encourage certain behavior; it shows what lawmakers care about; it can be used to fund wars or other government services |
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