Terms

Taxation: the process in which the government takes ownership of
portions of income or other assets from private individuals


Budget deficits: the excess of government spending over tax receipts the
deficit is the amount the government must borrow to pay its
bills in a given period


Inflation: the creation of more money, which drives up prices


Black market: the system of illegal transactions that violate government
regulations


Sales tax: A tax that applies to goods and services as they are sold to the
customer sales taxes are usually applied as percentages of the
pre-tax dollar amount


Paternalism: Overriding the desires of someone else because he or she is
not considered competent to make the right decision


Income tax: A tax that applies to the earnings of an individual or a
corporation Income taxes are usually applied as percentages
of the pre-tax dollar income


Graduated income tax: An income tax that applies higher rates to higher
levels of income


Income Tax Brackets: the thresholds of income that are taxed at various
rates For example, the lowest tax bracket might include
incomes ranging from $0 to $10,000, which is taxed at 3%, while the next bracket might include incomes ranging from $10,001 to $20,000, which is taxed at 5%


Tax Deduction: A provision in the tax code that allows a particular expense
(such as medical expenses or the purchase price of a new solar
panel) to be subtracted from an individual’s taxable income
this means that tax-deductible items are paid for with “pretax dollars,” which allows an individual to buy more with his
income


Taxable income: the amount of income actually subject to the offcial tax
rates for each bracket taxable income is the original income
after all deductions and other adjustments have been made


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