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ACCT303 > CH 3: Introduction to Tax > Flashcards

CH 3: Introduction to Tax Flashcards

1
Q

who care about taxes

A

-businessess
-politicians
-individuals

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2
Q

why do businesses care abt taxes

A

business activities such as deciding location, etc, can affect a businesses taxes

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3
Q

why do politicians care abt taxes

A

-they distinguish themselves from their opponents based on their tax rhetoric

-get in the way of an efficient tax system

-business hire lobbyists for/against various tax reasons

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4
Q

what is a tax

A

a payment required by a govt that is unrelated to any specific benefit or service received from the govt

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5
Q

3 key components of a tax

A

payment required

Payment imposed by local gvt agency (local, state, federal)

Payment not tied directly to a benefit received by the taxpayer

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6
Q

main purpose of a tax

A

fund government operations

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7
Q

other purpose of taxes

A

-encourage behavior
-discourage behavior (sin taxes)
-special purpose (musems)

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8
Q

what qualifies as a tax

A

anything u are required by the govt to pay for that does not benefit you in any way

ex: tax for road fixing

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9
Q

How to calculate tax

A

Tax= Tax Base × Tax Rate

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10
Q

Tax base

A

defines what is actually taxed and is expressed in monetary terms

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11
Q

Tax rate

A

level of taxes imposed on the tax base, usually expressed a percentage

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12
Q

3 types of tax rates

A

-average
-effective
-marginal

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13
Q

average tax rate definition +formula

A

taxpayers avg level of taxation on each dollar of taxable income

total tax/ taxable income

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14
Q

effective tax rate definition + formula

A

taxpayers abg rate of taxation on each dollar of total income (both tax and non taxable)

total tax/ total income

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15
Q

key difference btw average and effective tax rate

A

denominator

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16
Q

marginal tax rate definition + forumula

A

tax rate that applies to the next additional increment of a taxpayers taxable income

new tax-old tax/new taxable income-old taxable income

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17
Q

accoutning income

A

based on gaap

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18
Q

total/economic income

A

takes opportunity costs into consideration

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19
Q

taxable income (skip)

A

based on tax codes and regulations

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20
Q

difference btw 1 taxable inc and acct in and taxable inc and total inc (skip)

A

1-a compny cant reduce its taxable income by including fines but fines are considering for accounting income

2-taxable income doesnt include opportunity costs

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21
Q

3 tax rate structures

A

-proportional
-progressive
-regressive

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22
Q

proportional tax rate

A

imposes a constant tax rate throughout the tax base

-state sales tax, corporate tax rate

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23
Q

progressive tax rate

A

imposes increasing marginal tax rate as tax base increases

-individual tax

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24
Q

regressive tax

A

imposes a decreasing marginal tax as the tax base increases

social security taxes, employment taxes

25
Q

federal taxes (List)

A

Individual income tax
excise taxes
unemployment tax
social security & medicare tax
estate tax,
customs & duties tax corporate income tax

26
Q

state and local taxes

A

-income taxes
-sales and use taxes
-property taxes
-excise taxes

27
Q

income taxes (federal)

A

Levied on individuals, corporates, estates and trusts

-largest one

28
Q

employment/unemploymet taxes (federal)

A

Second largest group

Include social security and medicare tax

Unemployment taxes fund temporary unemployment benefits for individuals terminated from their jobs without cause

29
Q

Excise taxes (federal)

A

3rd largest

Levied on the quantity of products sold

30
Q

Estate taxes (federal)

A

Levied on the fair market values of wealth transfers upon death or gift

31
Q

sales and use taxes (state)

A

Tax base for sales tax is the retail sale of goods and some services

Tax base for use tax is the retail price of which goods are owned,possesed, or consumed within a state that were not purchased within the state

32
Q

Property taxes (state)

A

Ad valorem taxes meaning that the tax base for each is the fair market value of the property

Real property taxes consist of taxes on land and structures permanently attached to land

Personal property taxes include assets on other types of property both tangible and intangible

33
Q

income taxes (state)

A

Most state taxable income calculations largely conform to the federal taxable

34
Q

Excise taxes (state)

A

States typically impose excise taxes on items subject to federal excise tax.

35
Q

Implicit taxes

A

Indirect taxes that result from a tax advantage the govt grants to certain transactions

Defined as the reduced before tax return bc of its tax advantageous status

Difficult to quantify but important to understand in evaluating the relative tax burdens of tax-advantaged investments

36
Q

alt tax systems

A

sufficiency
equity
certainty
convenience
economy

37
Q

sufficency

A

Involves assessing the aggregate size of the tax revenues that must be generated and making sure that the tax system provides these revenues

38
Q

static revenue forcasting

A

-part of sufficeny

forecasting that ignores how taxpayers may alter their activities based to a tax law changes

39
Q

dynamic revenue forcasting

A

-part of sufficeny

-forecasting that tries to predict possible responses by taxpayers to new tax laws

Income effect& Substitution effect

40
Q

equity

A

How the tax burden should be distributed across taxpayers

A tax system is considered fair or equitable if the tax is based on the taxpayers ability to pau

horizontal and vertical equity

41
Q

horizontal equity

A

2 taxpayers in similar situations pay the same tax

42
Q

vertical equity

A

taxpayers w greater ability to pay tax pay more tax relative to ppl w lesser ability to pay

43
Q

Certainty

A

Taxpayers should be able to determine when and where to pay the tax and how to determine tax

44
Q

Convenience

A

Tax system should be designed to be collected without hardship to the taxpayer

45
Q

Economy

A

Should minimize the compliance and administration costs associated with the tax system

46
Q

The first personal income tax was enacted in 1861 to fund the

A

civil war

47
Q

The estate tax may also be referred to as the

A

death tax

48
Q

excise tax examples

A

-gasoline
-coal
-alc
-tabocco
-phones & airline tickets

49
Q

what is excluded from the estate giftdeath tax

A

payments on ones behalf for education

50
Q

tax base of a sales tax

A

retaile sales of goods and some services

51
Q

tax base for use tax

A

retail price of goods owned, possessed, or consumed within a state that were not purchased within the state

52
Q

whats an ad valorem tax

A

tax base is the fair market value

53
Q

example of economy tax system

A

state
enforcement of use taxes on
individuals or “under-the-table” household help

54
Q

example of convience tax system

A

Employer withholds and
remits taxes on your behalf

55
Q

use tax explain self asses

A

if u buy a good online, or out of state, and u are not charged sales tax, u are supposed to self assess and input it urself into ur taxes (most ppl don’t do this)

56
Q

income effect

A

as tax rates go up, people will work
harder to maintain same after-tax income.

57
Q

substitution effect

A

as tax rates go up, people will
substitute nontaxable activities because the marginal
value of taxable ones has decreased

58
Q

what revenue for-casting does our government use

A

dynamic forecasting

ACCT303 (17 decks)

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