Introduction

A Tax Lover’s Dictionary

A guide to the buzzwords and catchy phrases you won’t be able to escape while reading this report

Circuit breakers are a device to help alleviate the burden of property taxes. Senior citizens or other residents whose income is below a certain amount get, for example, income tax refunds when the property taxes paid exceed a certain percentage of income.

Deductions are subtractions from gross income for the purpose of determining a tax bill. They are not the same as credits, which are subtracted from the actual tax paid.

Effective tax rate is the ratio, generally expressed in percentages, of taxes paid to a taxpayer’s total income.

Elasticity refers to the tendency of a tax to move in tandem with personal income in a state. For example, when personal income rises, a steeply graduated income tax tends to rise still more, and as such is considered to be elastic.

Excise taxes are levied on a specific good or service, such as cigarettes, alcohol or fuel, and are set by unit (for example, a gallon of gasoline) rather than purchase price. Sometimes they’re referred to as “selective sales taxes.”

Franchise tax is a tax on the privilege of doing business as a corporation in a state. Businesses pay it whether or not they make a profit.

Gross receipts tax is similar to a sales tax, but it is levied on the seller of goods or services rather than the consumer. It’s also known as a gross excise tax.

Homestead exemption is a state or local tax break that exempts a certain amount of the value of property upon which a property tax is based.

Integrated tax system is the technological process that permits a state to pull together the various taxes it collects through a centralized computer system.

Local-option taxes are levied at the local level, although the state usually has to grant permission for their creation.

Progressive tax system is one in which taxes get higher for wealthier residents; it’s the opposite of a regressive tax system. Sometimes called a “graduated” tax system.

Pyramiding, also known as cascading, describes the situation where a sales tax is levied on a good or service, the creation of which involved the payment of one or more other sales taxes. The final purchaser winds up paying multiple built-in taxes.

Regressive tax system is one in which effective tax rates fall as income rises. In other words, the burden tends to be overly high on the state’s less-affluent residents.

Severance taxes are taxes paid on the market value of natural resources, including oil, gas and coal.

Streamlined Sales Tax Project is the effort currently underway to simplify and standardize the sales tax systems of the states in order to deal with a U.S. Supreme Court ruling that forbids states from forcing retailers to collect sales taxes on Internet transactions, on the grounds that such collections would be too complicated.

Tax burden is a measure of the taxes paid in a state relative to another constant factor, such as total personal income, for example.

Tax expenditure report is a document produced by a state to show the revenue impacts of tax exemptions.

Tax incidence study is a report produced by a state to show the burden of an individual tax on various subsets of the total state population.

Telefiling is the ability to file (and sometimes pay) taxes over the phone.

2-D barcodes are computer-readable barcodes similar to those you’d find on a box of cereal. They allow computers to quickly and easily access a mass of data from a tax form.

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