Role of Income tax Flashcards

1
Q

Role of income tax

A

Raise Revenue, redistribute income, reprice goods and services

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2
Q

Raising Revenues

A

in 2013 47% revenue collected was through income tax

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3
Q

Redistribute income

A

Progressive, graduated rates, deductions, exemptions, EITC

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4
Q

Reprice goods/services

A

excise tax and tax credits

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5
Q

Factors of tax system

A

equitable, efficiency

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6
Q

benefit principle:

A

taxes should depend your your use (Water), hard to measure use of national defense

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7
Q

ability to pay principle

A

as income goes up so does your ability to pay. Idea of declining marginal utility of income

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8
Q

Declining marginal value of income

A

the more income you have, the less valuable a dollar is to you

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9
Q

Efficiency: Economic concept:

A

tax code decreases return on labor & savings which impacts economic growth, excise tax and credits, negative externalities, positive externalities

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10
Q

excise tax

A

reprices cost of good upwards, we want to discourage (smoking)

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11
Q

tax credits

A

sections 21-53: lowers price, we want to encourage (hybrid cars)

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12
Q

negative externalities

A

pass on cost to everyone else (gas guzzlers) that’s why we want government involved

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13
Q

deficits are:

A

tax hikes on future generations

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