ACC250 Chapter 1 Flashcards
A tax based on the value of property.
ad valorem
A taxpayer’s average level of taxation on each dollar of taxable income.
ATR = total tax / taxable income
average tax rate
A subset (or portion) of the tax base subject to a specific tax rate. These are common to graduated taxes.
bracket
One of the criteria used to evaluate tax systems. This means taxpayers should be able to determine when, where, and how much tax to pay.
certainty
One of the criteria used to evaluated tax systems. This means a tax system should be designed to facilitate the collection of tax revenues without undue hardship on the taxpayer or the government.
convenience
The process of forecasting tax revenues that incorporates into the forecast how taxpayers may alter their activities in response to a tax law change.
dynamic forecasting
A tax assessed for a specific purpose (e.g., for education).
earmarked tax
One of the criteria used to evaluate tax systems. This means a tax system should minimize its compliance and administration costs.
economy
The taxpayer’s average rate of taxation on each dollar of total income (taxable & nontaxable income).
ETR = total tax / total income
effective tax rate
Taxes consisting of the Old Age, Survivors, and Disability Insurance (OASDI) tax, commonly called the Social Security tax, and the Medical health Insurance (MHI) tax (a.k.a. Medicare tax).
employment taxes
One of the criteria used to evaluate a tax system. A tax system is considered this if the tax is based on the taxpayer’s ability to pay; taxpayers with a greater ability to pay tax, pay more tax.
equity
A federal transfer tax. Based upon the fair market values of wealth transferred upon death.
estate tax
Taxes levied on the retail sale of particular products. They differ from other taxes in that the tax base for this tax typically depends on the quantity purchased rather than a monetary amount.
excise taxes
A tax directly imposed by a government.
explicit tax
A tax in which a single tax rate is applied through the tax base.
flat tax
A federal transfer tax. Based on the fair market value of the gift.
gift tax
Taxes in which the tax base is divided into a series of monetary amounts, or brackets, where each successive bracket is taxed at a different (gradually higher or gradually lower) percentage rate.
graduated taxes
One of the dimensions of equity. This is achieved if taxpayers in similar situations pay the same tax.
horizontal equity
Indirect taxes that result from a tax advantage the government grants to certain transactions to satisfy social, economic, or other objectives. They are defined as the reduced before-tax return that a tax-favored asset produces because of its tax-advantaged status.
implicit tax
One of the two basic responses that a taxpayer may have when taxes increase. This predicts that when taxpayers are taxed more (ex. tax rate increases), they will work harder to generate the same after-tax dollars.
income effect
A tax in which the tax base is income. These are imposed by the federal government and most states.
income tax
Taxes imposed by local governments.
local tax
The tax rate that applies to the next additional increment of a taxpayer’s taxable income (or to deductions).
MTR = (new total tax - old total tax) / (new taxable income - old taxable income)
marginal tax rate
The medical Health Insurance (MHI) tax. This tax helps pay medical costs for qualifying individuals. This tax helps pay medical costs for qualifying individuals. This tax rate for employees is 1.45% up to $200000 ($125k if filing separately; $250k married filing jointly). & is 2.35% in excess of $200k ($125k sep.;$250 mj). For employers, the tax rate is 1.45% regardless of amt of wages.
Medicare tax
A tax on the fair market value of all types of tangible and intangible property, except real property.
personal property tax
A tax rate structure that imposes an increasing marginal tax rate as the tax base increases. As the tax base increases, both the marginal tax rate and the taxes paid increase.
progressive tax rate structure
Also known as flat tax. This tax rate structure imposes a constant tax rate throughout the tax base. As the tax base increases, the taxes paid increase proportionally.
proportional tax rate structure
A tax on the fair market value of land and structures permanently attached to the land.
real property tax
A tax rate structure that imposes a decreasing marginal tax rate as the tax base increases. As the tax base increases, the taxes paid increase, but the marginal tax rate decreases.
regressive tax rate structure
A tax imposed on the retail sales of goods (plus certain services). Retailers are responsible for collecting and remitting the tax; typically collected at the point of sale.
sales tax
Social Security and medicare taxes paid by the self-employed on a taxpayer’s net earnings from self-employment. Also called FICA tax.
self-employment tax
Taxes imposed on the purchase of goods that are considered socially less desirable.
sin taxes
The Old Age, Survivors, and Disability Insurance (OASDI) tax. Intended to provide basic pension coverage for the retired & disabled. EE’s pay SS tax rate of 6.2% on the wage base - ER’s also pay 6.2%. The base of this tax is limited to an annually determined amount of earned wages.
Social Security tax
A tax imposed by one of the 50 U.S. States
state tax
The process of forecasting tax revenues based on the existing state of transactions while ignoring how taxpayers may alter their activities in response to a tax law change.
static forecasting
One of the two basic responses that a taxpayer may have when taxes increase. This response predicts that, when taxpayers are taxed more, rather than work more, they will substitute nontaxable activities for taxable ones because the marginal value of taxable activities has decreased.
substitution effect
A standard for evaluating a good tax system. Defined as assessing the aggregate size of the tax revenues that must be generated and ensuring that the tax system provides these revenues.
sufficiency
A payment required by a government that is unrelated to any specific benefit or service received from the government.
tax
The item that is being taxed.
tax base
The level of taxes imposed on the tax base, usually expressed as a percentage.
tax rate
Taxes on the transfer of wealth from one taxpayer to another. Estate and gift taxes are examples.
transfer taxes
The tax that pays for temporary unemployment benefits for individuals terminated from their jobs without cause.
unemployment taxes
A tax imposed on the retail prices of goods owned, possessed, or consumed within a state that were not purchased within the state.
use tax
A tax imposed on the producer of goods (and services) on the value of goods (services) added at each stage of production. Common in Europe.
value-added tax
One of the dimensions of equity. This is achieved when taxpayers with greater ability to pay tax, pay more tax relative to taxpayers with a lesser ability to pay tax.
vertical equity
