14 - fiscal policy and supply side policy Flashcards
direct taxes
taxes levied directly on the income of an individual or organisation
principles of taxation
a modern list of characteristics of a ‘good tax’ system
horizontal equity
when people or firms with the same income and financial circumstances pay the same amount of tax
vertical equity
when the amount that people and firms pay is based on their ability to pay
hypothecation
when taxes are earnmarked for a specific purpose
benefit principle
the argument that taxes should be linked to the benefits received by taxpayers
the budget
the governments annual announcement of changes to its planned levels of spending and taxation
progressive tax
where the proportion of a persons income paid in tax increases as income increases
regressive tax
where the proportion paid in tax falls as income increases
proportional tax
where the proportion paid in tax stays the same as income increases
capital expenditure
government spending to improve the productive capacity of the nation (e.g schools and hospitals)
current expenditure
government spending on the day-to-day running of the public sector, including raw materials and wages of public sector workers
transfer payments
government payments to individuals for which no service is returned (e.g benefits)
balanced budget
where government receipts equal government spending in a financial year
budget deficit
where government spending exceeds government receipts in a financial year
