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Econ Chapter 9
Economic Institutions and Issues
| Term | Definition |
|---|---|
| Sin Tax | relatively high tax designed to raise revenue and discourage consumption of a socially undesirable product |
| Incidence of a Tax | final burden of the tax |
| Tax Loophole | exemption or oversight in the tax law allowing a taxpayer to avoid paying certain taxes |
| Individual Income Tax | federal tax levied on wages, salaries, and other income of individuals |
| Sales Tax | general state or city tax levied on a product at the time of sale |
| Tax Return | annual report by a taxpayer filed with the local, state, or federal government detailing income earned and taxes owed |
| Benefit Principle of Taxation | belief that taxes should be paid according to benefits received regardless of income |
| Ability-to-Pay Principle of Taxation | belief that taxes should be paid according to the level of income, regardless of benefits received |
| Proportional Tax | tax in which the percentage of income paid in tax is the same regardless of level of income |
| Average Tax Rate | total taxes paid divided by total taxable income |
| Medicare | federal health-care program for senior citizens |
| Progressive Tax | tax in which the percentage of income paid in tax rises as level of income rises |
| Marginal Tax Rate | tax rate that applies to the next dollar of taxable income |
| Regressive Tax | tax in which the percentage of income paid in tax goes down as income rises |
| Internal Revenue Service (IRS) | branch of the U.S. Treasury Department that collects taxes |
| Payroll Withholding System | system that automatically deducts income taxes from paychecks on a regular basis |
| Indexing | adjustment of the tax brackets to offset the impact of inflation |
| FICA | Federal Insurance Contributions Act; tax levied on employers and employees to support Social Security and Medicare |
| Payroll Tax | tax on wages and salaries deducted from paychecks to finance Social Security and Medicare |
| Corporate Income Tax | tax on corporate profits |
| Excise Tax | general revenue tax levied on the manufacture or sale of selected items |
| Estate Tax | tax on the transfer of property when a person dies |
| Gift Tax | tax paid by the donor on transfer of money or wealth |
| Customs Duty | tax on imported goods |
| User Fee | fee paid for the use of a good or service |
| Intergovernmental Revenue | revenue funds that one level of government receives from another level of government |
| Property Tax | tax on tangible and intangible possessions such as real estate, buildings, furniture, stocks, bonds, and bank accounts |
| Tax Assessor | person who examines and assesses property values for tax purposes |
| Natural Monopoly | market structure in which average costs of production are lowest when a single firm exists |
| Payroll Withholding Statement | document attached to a paycheck summarizing pay and deductions |
| Accelerated Depreciation | schedule that spreads depreciation over fewer years to generate larger tax reductions |
| Investment Tax Credit | tax credit given for purchase of equipment |
| Alternative Minimum Tax | personal income tax rate that applies to cases in which taxes would otherwise fall below a certain level |
| Capital Gains | profits from the scale of an asset held for 12 months or longer |
| Flat Tax | proportional tax on individual income after a specified threshold has been reached |
| Value-Added Tax (VAT) | tax on the value added at every stage of the production process |
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