Chapter 6 - Funding The Public Sector Flashcards
limit on government spending and transfer payments
government budget constraint
three sources of government funding
fees for gov services, taxes, borrowing
the value of goods, services, wealth, or incomes subject to taxation
tax base
the proportion of a tax base that must be paid to a government as taxes
tax rate
change in the tax payment divided by the change in income
marginal tax rate
marginal tax rate formula
= change in taxes due / change in tax income?
a specified interval of income to which a specific and unique marginal tax rate is applied
tax bracket
total tax payment divided by total income
average tax rate
tax system in which the tax bill comprises exactly the same proportion no matter a person’s income
proportional taxation
tax system where higher percent of income tax is paid based on income
progressive tax
a tax system in which as more dollars are earned, the percentage of tax paid on them falls
regressive taxation
positive difference between the purchase price and the sale price of an asset
capital gain
negative difference between the purchase price and the sale price of an asset
capital loss
corporation pays taxes on its profits and dividend income is taxed. this is called blank
double taxation
earnings that a corporation saves, or retains, for investment in other productive activities and earnings that are not distributed to stockholders
retained earnings
the distribution of tax burdens among various groups in society
tax incidence
tax incidence is distributed among these three things
consumers, stockholders, employees
taxes assessed on the prices paid on a large set of goods and services
sales tax
assessing taxes by charging a tax rate equal to a fraction of the market price of each unit purchased
ad valorem taxation
based on the assumption that changes in the tax rate leave the tax base unaffected
static tax analysis
recognizes that higher tax rates may shrink the tax base
dynamic tax analysis
a tax levied on purchases of a particular good or service
excise tax
a constant tax assessed on each unit of a good that consumers purchase
unit tax
