Chapter 12 - The Design of the Tax System

President Bill Clinton

________ signed a law that raised marginal tax rates on rich Americans to around 40 %.

Gross Domestic Product

The ________ (GDP) measures the total income in the economy.

Regressive

________: a tax for which high- income taxpayers pay a smaller fraction of their income than do low- income taxpayers.

Taxpayers

________ have the ability to put some of their income into special savings accounts.

Progressive

________: a tax for which high- income taxpayers pay a larger fraction of their income than do low- income taxpayers.

deadweight losses

While taxes typically cause ________, the tax system should be efficient and equitable.

Profit

________ is the amount a corporation receives for goods or services it sells.

Proportional

________: a tax for which high- income taxpayers pay the same fraction of income.

Taxes

________ on gas are sometimes justified by the benefits principle.

Tax systems

________ require equity and efficiency.

Receipts

________ showed over $ 2.5 trillion in paid taxes in 2017.

Excise taxes

________ are taxes on specific goods.

Benefits principle

________: the idea that people should pay taxes based on the benefits they receive from government services.

Vertical equity

________: the idea that taxpayers with a greater ability to pay taxes should pay larger amounts.

Horizontal equity

________: the idea that taxpayers with similar abilities to pay taxes should pay the same amount.