Chapter 9 & 12 Microeconomics Flashcards
Vertical Equity
Rich people should pay more taxes
World Price
Price of goods in the world market
Horizontal Equity
Tax payers with similar income levels should pay the same amount of tax
Tarif
Tax on a good produced abroad and then sold domestically
What are the 4 benefits of trade
More goods to choose from
More Competition
More Ideas
Cost is lowered through economics of scale
What is an example of a Tarif?
If Toyota cars are Japanese made cars that are sold in the US, then the US taxes them
Economics of Scale
Cost is lowered when goods are produced in large quantities
Ability to Pay Principle
Taxing people based on them being rich or poor
Progressive Tax
High income tax payers, pay a larger amount of their income
Marginal Tax Rate
the amount taxes increase from an additional dollar of income
What are the 2 largest sources of tax revenue for the United States?
Individual Income Tax
Payroll Tax
Domestic Price
the price of a good that is sold and produced in the same country
Average Tax Rate Formula
Total Tax
———– x 100
Total Income
Which tax system best describes the U.S. federal tax system?
Progressive Tax
Lump-some Tax
Tax that is the same for anyone
Proportional Tax
All tax payers pay the same fraction of income
What is an example of Proportional Tax?
If the tax rate is 40% everyone gets taxed at the same rate
- income = 100
- tax paid $40
- then income = 1000
- tax = $400
Benefit Principle
The idea that people should pay taxes based on the benefits they receive
What is an example of a benefits principle?
Money gotten from gasoline tax should be used to fix roads
People that buy gasoline are the people who use roads
Regressive Tax
High income tax payers pay smaller fraction of income then lower income tax payers
