Chapter 15 Flashcards
Earned Income Tax Credit (EITC)
A method of assisting the working poor through the tax system
Effective income tax
Percentage of total taxes paid divided by total income
Estate tax
A tax imposed on the value of an inheritance
Income
Flow of money received, often measured on a monthly or annual basis
Income inequality
When one group receives a disproportionate share of total income or wealth than others
Lorenz Curve
A graph that compares the cumulative income actually received to a perfectly equal distribution of income; it shows the share of population on the horizontal axis and cumulative percentage of total income received on the vertical axis
Medicaid
A federal-state joint program enacted in 1965 that provides medical insurance for certain (not all) low income people, including the near-poor as well as those below the poverty line, and focusing on low-income families with children, elderly, and disabled
Near poor
Those who have income just above poverty line
Poverty
The situation of being below a certain level of income one needs for basic standard of living
Poverty line
The specific amount of income one requires for the basic standard of living
Poverty rate
Percentage of population living below poverty line
Poverty trap
Antipoverty programs set up so that government benefits decline substantially as people earn more: as a result, working provides little financial gain
Progressive tax system
A tax system in which the rich pay a higher percentage of their income in taxes, rather than a higher absolute amount
Quintile
Dividing a group into fifths, a method economists use to look at distribution of income
Redistribution
Taking income from those with higher incomes and providing income to those with lower incomes
