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Tax tax rate X Tax Base Tax Rate level of taxed imposed on the tax base and is usually expressed as a % Tax Base income, property, goods or services that are subject to a tax Marginal Tax Rate the extra taxes paid on an additional dollar of income Average Tax Rate (Total Tax)/ taxable income Effective Tax Rate (Total tax)/ Total Income proportional Tax Rate A tax rate that remains the same, regardless of the size of the base Progressive Tax Rate tax system in which tax rates increase for higher incomes Regressive Tax Rate A tax rate that decreases as the size of the base increases how do we evaluate different tax systems? sufficiency, equity, certainty, convenience Sufficiency based on what the income of the government would actually have to be to fulfill their needs Equity who should pay more taxes? How the tax burden should be distributed across taxpayers Horizontal Equity The idea that taxpayers with similar abilities to pay taxes should pay the same amount Vertical Equity the idea that taxpayers with a greater ability to pay taxes should pay larger amounts Statute of limitations 3 years after the paperwork was turned in to collect your overpaid money primary source if it comes directly from one of the three branches of government Secondary source if it comes from any other source other than the three branches of government income shifting A technique used to reduce taxes in which a taxpayer shifts a portion of income to relatives in lower tax brackets conversion strategy The process by which the new system is introduced into the organization. Composed of Direct and Parallel conversion