The flashcards below were created by user
Anonymous
on FreezingBlue Flashcards.
-
What are the 3 componenets of a tax?
- 1. Pmt is required
- 2. Pmt is imposed by a gov’t agency
- 3. pmt is not tied directly to the benefit rec’d by the taxpayer
-
What is the general definition of a tax?
It is a pmt required by a gov't that is unrelated to any specific benefit or service received from the gov’t.
-
Margaret travels to Birmingham where she rents a room & dines at several restaurants. The price she pays for her room & meals includes an additional 2% city surcharge to fund roadway construction in Birmingham. Is this a tax?
-
Yes. The pmt is required by local gov’t & does not directly relate to a specific benefit that Margaret receives.
-
What is a sin tax?
tax meant to discourage certain behaviors
-
Give an example of a sin tax?
High surcharges on alcohol & tobacco
-
What is an earmarked tax?
A tax that is assessed for a specific purpose & pmt made by the taxpayer does not directly relate to the specific benefit rec’d by the taxpayer.
-
What is an example of an earmarked tax?
a 1% sales tax on education
-
Margaret’s parents recently built a house & were assessed $1k by their county gov’t to connect to the county sewer system. Is this a tax?
No. The assessment was mandatory & it was paid to a local gov’t. However, the pmt does directly relate to a specific benefit (sewer service) received by the payee.
-
What is the formula to calculate a tax?
-
Tax = Tax Rate * Tax Base
-
What is the tax base?
- What is actually taxed & is usually
- expressed in monetary terms
-
What is the tax rate?
- determines the level of taxes imposed on the tax
- base & is expressed as a %
-
Can different portions of a tax base be taxed differently?
yes
-
What is a flat tax?
A single tax applied to an entire base
-
What is a graduated tax?
Base is divided into several monetary amounts or brackets, & each successive bracket is taxed at a gradually higher or gradually lower tax rate.
-
What are the 3 different ways to measure tax rates?
MTR, AVG tax rate, & Effective Tax rate
-
What is the definition of a marginal tax rate & the formula?
- Applies to the next additional increment of a taxpayers taxable income or deduction.
- MTR = Change in Tax/Change in Taxable Income
- = (new tax-Old tax)/(New taxable Income-Old taxable income)
-
What is the definition of the avg tax rate & it's formula?
-
represents the avg level of taxation on each dollar of taxable income.
- ATR= Total Tax/Taxable Income
- Used for budgeting tax expense
- ATR is generally lower than the MTR.
-
Which is generally lower? ATR or MTR?
ATR is generally lower
-
What is ATR generally used for?
Used for budgeting tax expense
-
What is the definition of the Effective tax Rate?
represents the avg level of taxation on each dollar of taxable income.
-
What is the formula for the Effective Tax Rate?
Effective Tax Rate = Total Tax/Total Income
-
What does the Effective tax rate provide a better descirption of than the ATR does?
It shows the taxpayers tax burden
-
The effective tax rate is generally equal to or lower than which tax rate?
ATR
-
The effective Tax Rate captures the incidenc of taxation, which relates to the ultimate conomic burden of a tax. T/F?
True
-
What are the 3 types of Tax Rate Structures?
Proportional, Progressive & Regressive
-
Which tupe of tax rate structure is aka a "Flat Tax"?
Proportional Tax Rate Structure
-
What is the definition of a proportional tax rate structure?
- - It has a constant tax rate throughout the base.
- - As the tax base increases, so do taxes paid.
- - The MTR is equal to the PTR cause it’s rate is the same throughout. This
- means that the ATR is also the same.
-
What is the formula for calculating a proportional tax rate structure?
PTR = Tax Base* Tax Rate
-
Which type of tax is an example of a proportional tax rate structure?
Sales Tax
-
What is the definition of a progressive tax rate structure?
- - has an increasing MTR as the tax base increases.
- -As the tax base increases, so do the MTR & taxes paid increase
- - The ATR in a Progressive tax rate structure will always be less than or equal
- to the MTR.
-
What is an example of a progressive tax rate structure?
-
Federal & State Income Taxes
-
What is the definition of a regressive tax rate structure?
-
- has a decreasing MTR as the tax base increases.
- - As the tax base increases, the taxes paid increases, but the MTR decreases.
- - Not a common structure in the US
-
Give an example of a regressive tax rate structure
-
Social Security, Federal & State Unemployment taxes.
-
Which tax is the most significant revenue making tax in the US?
Federal Income tax
-
-
- levied on the retail sale of particular products like alcohol, diesel, gas,
- tobacco, telephone use, & air transportation.
- - Can also be levied at the state level
- - Differs from other taxes in that the tax base depends on the quantity purchased,
- not a monetary amount.
-
What is a transfer tax?
- - aka estate & gift taxes
- - Very minor tax in revenue collection
- - Levied on the fair market values of wealth when death or fit occurs.
|
|