Key Terms

Key Terms

earned income tax credit (EITC)
a method of assisting the working poor through the tax system
effective income tax
percentage of total taxes paid divided by total income
estate tax
a tax imposed on the value of an inheritance
Gini coefficient
measure of the extent to which total income is distributed (or dispersed) across the population
a flow of money received; often measured on a monthly or an annual basis
income inequality
when one group receives a disproportionate share of total income or wealth than others
Lorenz curve
a graph that compares the cumulative income actually received to a perfectly equal distribution of income; it shows the share of population on the horizontal axis and the cumulative percentage of total income received on the vertical axis
a federal–state joint program enacted in 1965 that provides medical insurance for certain (not all) low-income people, including the near-poor as well as those below the poverty line, and focusing on low-income families with children, the low-income elderly, and the disabled
those who have incomes just above the poverty line
the situation of being below a certain level of income needed for a basic standard of living
poverty line
the specific amount of income needed for a basic standard of living
poverty rate
the percentage of the population living below the poverty line
poverty trap
antipoverty programs set up so that government benefits decline substantially as people earn more income—as a result, working provides little financial gain
progressive tax system
a tax system in which the rich pay a higher percentage of their income in taxes rather than a higher absolute amount
dividing a group into fifths; a method often used to look at distribution of income
taking income from those with higher incomes and providing income to those with lower incomes
safety net
the group of government programs that provide assistance to the poor and the near-poor
Supplemental Nutrition Assistance Program (SNAP)
a federally funded program, started in 1964, in which each month poor people receive SNAP cards they can use to buy food
the sum of the value of all assets, including money in bank accounts, financial investments, a pension fund, and the value of a home