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| A payment required by a government that is unrelated to any specific benefit or service received from the government |
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| Impose relatively high surcharges on alcohol and tobacco products |
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| A tax that is assessed for a specific purpose |
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| Defines what is actually taxed and is usually expressed in monetary terms |
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| Determines the level of taxes imposed on the tax base and is usually expressed as percentage |
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| A single tax applied to an entire base |
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| The base is divided into a series of monetary amounts, or brackets, and each successive bracket is taxed at a different (gradually higher or gradually lower) percentage rate. |
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| A tax based on the value of property |
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A taxpayer's average level of taxation on each dollar of taxable income. Specifically,
Average Tax Rate = Total Tax/ Taxable Income |
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| A subset (or portion) of the tax base subject to a specific tax rate. Brackets are common to graduated taxes |
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| One of the criteria used to evaluate tax systems. Certainty means taxpayers should be able to determine when, where, and how much tax to pay |
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| One of the criteria used to evaluate tax systems. Convenience means a tax system should be designed to facilitate the collection of tax revenues without undue hardship on the taxpayer or the government |
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| The process of forecasting tax revenues that incorporates into the forecast how taxpayers may alter their activities in response to a tax law change. |
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| One of the criteria used to evaluate tax systems. Economy means a tax system should minimize its compliance and administration costs. |
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The taxpayer's average rate of taxation on each dollar of total income (taxable and nontaxable income). Specifically,
Effective Tax Rate = Total Tax/ Taxable Income |
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| Taxes consisting of the Old Age, Survivors, and Disability Insurance (OASDI) tax, commonly called the Social Security tax, and the Medical Health Insurance (MHI) tax known as the medicare tax. |
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| One of the criteria used to evaluate a tax system. A tax system is considered fair or equitable if the tax is based on the taxpayer's ability to pay; taxpayers with a greater ability to pay tax, pay more tax. |
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| (labeled the "death tax" by opponents) Based on fair market values of wealth transfers upon death |
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| Taxes levied on the retail sale of particular products. They differ from other taxes in that the tax base for an excise tax typically depends on the quantity purchased, rather than the monetary amount. |
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| A tax directly imposed by a government. |
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| Based on fair market values of wealth transfers by gifts |
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| One of the dimensions of equity. Horizontal equity is achieved if taxpayers in similar situations pay the same tax. |
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| Indirect taxes that result from a tax advantage the government grants to certain transactions to satisfy social, economic, or other objectives. They are defined as the reduced before-tax return that a tax-favored asset produces because of its tax-advantaged status. |
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| One of the two basic responses that a taxpayer may have when taxes increase. The income effect predicts that when taxpayers are taxed more (e.g., tax rate increases from 25 to 28 percent), they will work harder to generate the same after-tax dollars. |
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| A tax in which the tax base is income. Income taxes are imposed by the federal government and by most states. |
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| Taxes imposed by local governments (cities, counties, school districts, etc.). |
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The tax rate that applies to the next additional increment of a taxpayer's taxable income (or to deductions). Specifically,
Marginal Tax Rate = (Change) Tax/ (Change) Taxable Income
= (New Total Tax- Old Total Tax) / (New Taxable Income - OldTaxable Income) |
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| The Medical Health Insurance (MHI) tax. This tax helps pay medical costs for qualifying individuals. Employees pay the Medicare tax at a rate of 1.45% on all wages. Self-employed taxpayers pay Medicare taxes at a rate of 2.9% of net earnings from self-employment. |
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| A tax on the fair market value of all types of tangible and intangible property, except real property. |
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| Progressive Tax Rate Structure |
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| A tax rate structure that imposes an increasing marginal tax rate as the tax base increases. As the tax base increases, both the marginal tax rate and the taxes paid increase. |
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| Proportional Tax Rate Structure |
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| Also known as a flat tax, this tax rate structure imposes a constant tax rate through the tax base. As the tax base increases, the taxes paid increase proportionally. |
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| A tax on the fair market value of land and structures permanently attached to land. |
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| Regressive Tax Rate Structure |
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| A tax rate structure that imposes a decreasing marginal tax rate as the tax base increases. As the tax base increases, the taxes paid increase, but the marginal tax rate decreases. |
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| A tax imposed on the retail sales of goods (plus certain services). Retailers are responsible for collecting and remitting the tax; typically sales tax is collected at the point of sale. |
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| Social Security and Medicare taxes aid by the self-employed on a tax-payer's net earnings from self-employment. For self-employed taxpayers, the terms "self-employment tax" and "FICA tax" are synonymous. |
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| The Old Age, Survivors, and Disability Insurance (OASDI) Tax. The tax is intended to provide basic pension coverage for the retired and disabled. Employees pay Social Security tax at a rate of 6.2% (4.2% in 2011 and 2012) on the wage base. (employer's also pay 6.2%). Self-employed taxpayers are subject to a Social Security tax at a rate of 12.4% (10.4% in 2011 and 2012) on their net earnings from self-employment. The base on which Social Security Taxes are paid is limited to an annually determined amount of wages and/or net earnings from self-employment. |
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| A tax imposed by one of the 50 U.S. states. |
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| The process of forecasting tax revenues based n the existing state of transactions while ignoring how taxpayers may alter their activities in response to a tax law change. |
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| One of the two basic responses that a taxpayer may have when taxes increase. The substitution effect predicts that, when taxpayers are taxed more, rather than work more, they will substitute nontaxable activities (e.g., leisure pursuits) for taxable ones because the marginal value of taxable activities has decreased. |
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| A standard for evaluating a good tax system. Sufficiency is defined as assessing the aggregate size of the tax revenues that must be generated and ensuring that the tax system provides these revenues. |
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| Taxes on the transfer of wealth from one taxpayer to another. The estate and gift taxes are two examples of transfer taxes. |
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| The tax that pays for temporary unemployment benefits for individuals terminated from their jobs without cause. |
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| A tax imposed on the retail price of goods owned, possessed, or consumed within a state that were not purchased within the state. |
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| A tax imposed on the producer of goods (and services) on the value of goods (services) added at each stage of the production. VAT are common in Europe. |
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| One of the dimensions of equity. Vertical equity is achieved when taxpayers with greater ability to pay tax, pay more relative to taxpayers with a lesser ability to pay tax. |
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