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  • personal income

    income received before taxes

    disposal income

    income received after taxes

    in-kind income

    goods/services received directly without payment in a market transaction

    wealth

    represents a stock of potential purchasing power of goods/services; the market value of assets

    in-kind

    Which type of income is typically used in poverty or other welfare analyses?

    size distribution of income

    the way total personal income is divided up among house holds or income classes

    income share

    the proportion of total income received by a particular group

    *

    draw the lorenz curve

    lorenz curve

    a graphic illustration of the cumulative size distribution of income; contracts complete equality with the actual distribution of income

    gini coefficient

    a mathematical summary of inequality based on the Lorenz curve

    market failure

    by levying taxes on the rich and providing transfer payments to the poor, the government redistribute market incomes to correct:

    progressive tax

    a tax system in which tax rates rise as incomes rise

    regressive tax

    a tax system in which tax rates fall as incomes rise

    progressivity

    is achieved by imposing increasing marginal tax rates on higher incomes

    marginal tax rate

    the tax rate imposed on the last dollar of income

    progressive

    ________________ taxes reduce inequality

    regressive

    _______________ taxes increase inequality

    tax elasticity of supply

    % change in quantity supplied/
    % change in tax rate

    vertical equity

    principle that people with higher incomes should pay more taxes

    horizontal equity

    principle that people with equal incomes should pay equal taxes

    loopholes

    the progressive tax rates apply to "taxable" income, not all income

    loopholes

    people with high incomes avoid high taxes by claiming large exemptions and deductions

    nominal tax rate

    taxes paid/
    taxable income

    efficient tax rate

    taxes paid/
    total economic income

    nominal tax rate

    the taxes actually paid as a percentage of taxable income

    effective tax rate

    taxes paid divided by the total economic income without regard to exemptions, deductions, etc.

    equity concerns

    the tax structure is less progressive in practice than in theory due to deductions and exemptions

    sales and property taxes

    regressive; w/ lower incomes tend to pay higher percent of their income on items subject to these taxes

    sales taxes

    major source or revenue for state goverment

    property taxes

    most local governments rely on:

    payroll taxes

    impose effective tax burdens; and is a regressive tax; half of these taxes is paid by employees and the other half by employers

    proportional

    the tax system as a whole is nearly

    flat tax

    a single-rate tax system

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