Lecture 5.1 Introduction to Taxation Flashcards
1
Q
Progressive Tax System
A
1) Terms of average tax rate: T/Z; increases with Z
2) Terms of marginal tax rate: dT/dZ; increases with dZ
2
Q
Proportional Tax System
A
T/Z does not vary with Z
3
Q
Average tax rate
A
T/Z
T = taxes paid
Z = income
4
Q
Marginal tax rate
A
dT/dZ
5
Q
Direct taxes
A
Taxes levied based on income received or assets/property owned by the taxpayer
6
Q
Indirect taxes
A
Taxes levied based on consumption purchases
7
Q
Reasons for taxation (3)
A
- collecting revenue for public spending
- redistribution
- corrective taxation
8
Q
Lump-sum tax
A
tax whose magnitude cannot be affected by the person subject to the tax
9
Q
distortionary
A
create incentives to
change behaviour – and cause a welfare loss
10
Q
Regressive tax
A
either average taxrate or marginal tax rate decreases with Z
