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Unformatted text preview: indirect taxes are taxes levied on specific economic activities the federal tax system the federal personal income tax a tax loophole is a special provision on the tax code that reduces taxation below normal rates (perhaps to zero) if certain conditions are met. tax exempt status of municipal bond interest a particular source of income is tax exempt if income from that source is not taxable. tax benefits for homeowners a tax deduction is a sum of money that may be subtracted before the taxpayer computes his or her taxable income every tax loophole encourages particular patterns of behavior and favors particular types of people. furthermore, because most loopholes mainly benefit the rich, they erode the progressivity of the income tax. the payroll tax typically social security, medicare, etc....
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- Spring '08