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Economy and Taxes terms
Growth, inflation, taxes and the case for markets.
Austrian economics A school of economic thought emphasizing individual choice, subjective value, entrepreneurship and skepticism of central planning and central banks. Deregulation The reduction or removal of government rules governing business and economic activity. Gross domestic product The total market value of all final goods and services produced within a country in a given period, the main measure of economic output. Keynesian economics A school of macroeconomics, from John Maynard Keynes, holding that government spending can offset slumps in private demand. Knowledge problem The argument that no central planner can gather the dispersed information needed to run an economy as effectively as markets do. Monetarism A school of economics, led by Milton Friedman, that holds the money supply is the chief influence on inflation and the business cycle. Recession A significant, widespread decline in economic activity lasting more than a few months, often marked by falling output and rising unemployment. Spontaneous order The idea that complex, orderly social arrangements such as markets and language emerge from individual actions without central design. Consumer Price Index The government's main measure of inflation, tracking price changes for a fixed basket of goods and services bought by urban consumers. Core inflation A measure of inflation that excludes volatile food and energy prices to show the underlying trend. Deflation A sustained decline in the general price level, which raises the real value of money and debts. Inflation A sustained increase in the general level of prices, reducing the purchasing power of money. Price controls Government-imposed limits on how high or low the price of a good or service may legally be. Stagflation A combination of slow economic growth, high unemployment and rising prices at the same time. Appropriations The laws through which Congress grants federal agencies authority to spend money each year on discretionary programs. Budget reconciliation A fast-track budget process that lets the Senate pass certain tax and spending legislation by simple majority, without a filibuster. Capital gains tax A tax on the profit from selling an asset such as stocks, real estate or a business for more than its purchase price. CBO score The Congressional Budget Office's nonpartisan estimate of how a bill would change federal spending, revenue and deficits. Child tax credit A federal tax credit that reduces what families owe for each qualifying child, partly refundable for some low-income parents. Continuing resolution A temporary law that keeps federal agencies funded at existing levels when regular appropriations have not been enacted. Corporate income tax A tax on the profits of corporations, set at a 21 percent federal rate since 2018 and applied separately from owners' personal taxes. Discretionary spending Federal spending that Congress sets each year through appropriations bills, including defense, transportation and many domestic agencies. Dynamic scoring A budget-estimating method that accounts for how a policy would change overall economic growth, and thus revenues. Earmark A provision in legislation that directs federal money to a specific project, recipient or location, often requested by a member of Congress. Earned income tax credit A refundable federal tax credit that supplements the earnings of low- and moderate-income workers, particularly those with children. Effective tax rate The share of total income a person or company actually pays in taxes after deductions and credits. Entitlement A government benefit to which people are legally entitled if they meet eligibility rules, such as Social Security and Medicare. Estate tax A federal tax on the transfer of a large estate at death, applying only above a high exemption threshold. Fiscal policy The use of government taxing and spending to influence the economy, set by Congress and the president. Flat tax An income tax with one rate for everyone, usually paired with a large exemption and few deductions. Laffer curve A graph showing that tax revenue is zero at both a 0 and a 100 percent rate, implying some revenue-maximizing rate in between. Line-item veto A power, held by many governors but not the president, to reject individual items in a spending bill while signing the rest. Mandatory spending Federal spending set by permanent law rather than annual appropriations, including Social Security, Medicare and Medicaid. Marginal tax rate The tax rate that applies to the next dollar of income, as distinct from the average rate on all income. National sales tax A proposed federal tax on retail purchases that would replace income and payroll taxes, usually with a rebate for households. Opportunity zone A designated low-income area where investors get tax benefits for placing capital gains in local businesses and real estate. Payroll tax A tax on wages that funds Social Security and Medicare, split between employers and employees. Progressive tax A tax whose rate rises as the taxpayer's income or wealth rises, so higher earners pay a larger share. Regressive tax A tax that takes a larger share of income from low earners than from high earners. Rescission A proposal, under the Impoundment Control Act, to cancel previously appropriated funds, with a fast-track vote in Congress. SALT deduction A federal income tax deduction for state and local taxes paid, capped at $10,000 from 2018 through 2025 and since raised. Sequestration Automatic, across-the-board cuts to federal spending triggered when budget limits or deficit targets are not met. Supply-side economics An approach holding that lower tax rates and less regulation boost production, investment and growth. Tax expenditure A provision of the tax code, such as a deduction or credit, that reduces tax owed to encourage a behavior, functioning like government spending. Value-added tax A consumption tax collected at each stage of production on the value added, widely used abroad but not in the United States. Wealth tax A recurring tax on the total net worth of individuals above a threshold, rather than on their annual income. Balanced budget amendment A proposed constitutional amendment requiring the federal government to balance its budget, usually with exceptions for emergencies. Budget deficit The amount by which federal spending exceeds revenue in a given year, financed by borrowing. Crowding out The idea that government borrowing raises interest rates or uses resources that would otherwise go to private investment and spending. Debt ceiling A statutory cap on the total amount the Treasury may borrow to pay obligations Congress has already approved. Debt-to-GDP ratio Federal debt measured as a share of the economy's annual output, used to judge whether borrowing is sustainable. National debt The total amount the federal government owes from past borrowing, including debt held by the public and by government accounts. PAYGO A budget rule requiring that new mandatory spending or tax cuts be offset by spending cuts or tax increases. Social Security trust fund The accounts, holding special Treasury securities, that receive Social Security payroll taxes and pay benefits. Unfunded liabilities Promised future benefits, such as Social Security and Medicare payments, that are not covered by dedicated funding projected to be available. Free trade The exchange of goods and services across borders with few or no tariffs, quotas or other government barriers. Protectionism A policy of shielding domestic industries from foreign competition through tariffs, quotas or subsidies. Section 232 tariffs A trade law letting the president impose tariffs on imports found to threaten national security. Tariff A tax imposed on imported goods, raising their price and generating government revenue or protecting domestic producers. Trade deficit The amount by which a country's imports of goods and services exceed its exports in a given period.