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Taxes and Spending terms
Rates, deficits and the size of government.
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.