| adjusted gross income (AGI) | Total net income from all sources.
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| capital gains | Any profit generated by selling an asset for more than was paid for it.
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| deductible | Approved types of expenses for income tax purposes.
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| deductions | Amounts by which AGI is reduced; the greater of either the standard deduction or itemized deductions.
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| exemptions | An amount by which AGI is reduced which is determined by the size of the family.
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| filing status | Classification of taxpayers based on household; can be single, married filing jointly, married filing separately, and single head of household.
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| horizontal equity | Equal people should be treaty equally.
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| income effect | An increase in price lowers spending power; if the good is normal, this further lowers consumption; if it is inferior, it can increase consumption back toward where it was (or even further). This effect works in either direction.
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| itemized deductions | Deductions for particular expenses on which the government does not want taxes paid.
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| marginal tax rate | The percentage of each dollar in a bracket that must be paid in tax.
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| neutral | When applied to a tax code, the implication that it does not favor particular forms of income or expenditure.
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| progressive taxation | Those with higher income pay a higher rate of tax.
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| standard deduction | The minimum level of deduction.
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| substitution effect | Purchase of less of a product than originally wanted when its price is high because a lower-priced product is available.
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| taxable income | Adjusted gross income minus personal exemptions minus (the greater of either the standard or itemized) deductions.
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| vertical equity | People across the income scale are treated fairly with regard to ability to pay.
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| withholding | Deduction from your paycheck to cover the estimated amount of taxes you are going to owe during a year.
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2003 McGraw-Hill Higher Education