The Federal Budget: Taxes and spending Flashcards
What’s the marginal tax rate?
The marginal tax rate is the tax rate that you must pay on an additional dollar of income.
What’s an average tax rate?
Your average tax rate is simply your total tax payment divided by your total income.
What’s income tax?
The income tax is a tax on your labour income and also on any income you receive from your investments, namely your interest income, your dividends and your capital gains.
Explain the alternative minimum tax
AMT is a separate income tax code to prevent the rich from not paying income taxes,
Define a progressive tax
A progressive tax has a higher tax rates for people with higher incomes
Define a flat tax
A flat tax has a constant tax rate
Define a regressive tax
A regressive tax has higher tax rates for people with lower incomes
What are the four biggest expenses of the U.S. federal budget?
Social Security
Defense
Medicare
Medicaid
Define social security
Social security is, measured in terms of dollars paid out the single largest government program in the world. The money you pay to Social security does not go to a trust with your name on it, but is shipped right away to the current elderly, who are receiving benefits.
How are social security benefits calculated?
Social Security benefits are defined by a complex formula depending on how many years a worker worked, what their average earnings were over their working life, whether or not they are married, what year they retire, and at what age.
What’s the difference between medicare and medicaid
Medicare covers the elderly
Medicaid covers the poor and the disabled
Is government spending wasted?
There are good reasons for thinking that governments might not spend money as carefully as you or I, namely weak incentives and lack of information on how to spend the money effectively.
What’s the national debts held by the public
A good measure of the current debt. All Federal debt held by individuals, corporations, state or local governments, foreign governments, and other entities other than the federal government itself.
Why do many economists worry about the future debt-to-GDP ratio?
The main forces driving these worries are not recession but demographics and increasing healthcare costs. The increase in the number of elderly people means higher social security and medicare payments
The alternative minimum tax has effectively made the federal income tax..
.. a more progressive system.
