ability-to-pay principle  the view that those with greater income should pay more in taxes than those with less income.
average tax rate  the total tax paid divided by the total taxable income.
corporate income tax  a tax on the accounting profits of corporations.
Current Population Survey  a monthly survey of a sample of U.S. households done by the U.S. Census Bureau; it measures employment, unemployment, the labor force, and other characteristics of the U.S. population.
earned income tax credit (EITC)  a part of the personal income tax through which people with low income who work receive a payment from the government or a rebate on their taxes.
excise tax  a tax paid on the value of goods at the time of purchase.
family support programs  transfer programs through which the federal government makes grants to states to give cash to certain low-income families.
flat tax  a tax system in which there is a constant marginal tax rate for all levels of taxable income.
food stamp program  a government program that provides people with low incomes with coupons (food stamps) that they can use to buy food.
Gini coefficient  an index of income inequality ranging between 0 (for perfect equality) and 1 (for absolute inequality); it is defined as the ratio of the area between the Lorenz curve and the perfect equality line to the area between the lines of perfect equality and perfect inequality.
Head Start  a government transfer program that provides day care and nursery school training for poor children.
housing assistance programs  government programs that provide subsidies either to low-income families to rent housing or to contractors to build low-income housing.
Lorenz curve  a curve showing the relation between the cumulative percentage of the population and the proportion of total income earned by each cumulative percentage. It measures income inequality.
mandated benefits  benefits that a firm is required by law to provide to its employees.
marginal tax rate  the change in total tax divided by the change in income.
means-tested transfer  a transfer payment that depends on the income of the recipient.
Medicaid  a health insurance program designed primarily for families with low incomes.
Medicare  a government health insurance program for the elderly.
payroll tax  a tax on the wages and salaries of individuals.
personal income tax  a tax on all forms of income an individual or household receives.
poverty line  an estimate of the minimum amount of annual income required for a family to avoid severe economic hardship.
poverty rate  the percentage of people living below the poverty line.
progressive tax  a tax for which the amount of an individual’s taxes rises as a proportion of income as the person’s income increases.
property tax  a tax on the value of property owned.
proportional tax  a tax for which the amount of an individual’s taxes as a percentage of income is constant as the person’s income rises.
quintile  divisions or groupings of one-fifth of a population ordered by income, wealth, or some other statistic.
regressive tax  a tax for which the amount of an individual’s taxes falls as a proportion of income as the person’s income increases.
sales tax  a type of excise tax that applies to total expenditures on a broad group of goods.
social insurance transfer  a transfer payment, such as social security, that does not depend on the income of the recipient.
social security  the system through which individuals make payments to the government when they work and receive payments from the government when they retire or become disabled.
supplemental security income (SSI)  a means-tested transfer program designed primarily to help the poor who are disabled or blind.
tax bracket  a range of taxable income that is taxed at the same rate.
tax incidence  the allocation of the burden of the tax between buyer and seller.
tax revenue  tax rate times the amount subject to tax (also simply called taxes).
taxable income  a household’s income minus exemptions and deductions.
transfer payment  a grant of funds from the government to an individual.
unemployment insurance  a program that makes payments to people who lose their jobs.