Glossary of key words:

Dillion’s Rule: Under Dillon's Rule, a municipal government has authority to act only when : (1) the power is granted in the express words of the statute, private act, or charter creating the municipal corporation; (2) the power is necessarily or fairly implied in, or incident to the powers expressly granted; or (3) the power is one that is neither expressly granted nor fairly implied from the express grants of power, but is otherwise implied as essential to the declared objects and purposes of the corporation.i

For more on North Carolina’s pseudo Dillon’s Rule status please see: http://canons.sog.unc.edu/?p=6894

Effective tax rate: The effective tax rate for individuals is the average rate at which their earned income is taxed. The effective tax rate is the net rate a taxpayer pays if all forms of taxes are included and divided by taxable income.ii

(Economic) Efficiency: The price paid by the buyer not exceed the additional cost of producing the good.iii This is normally the point where supply intersects demand and where the market, if left alone, would supply the good. However, when discussing taxes we are trying to minimize how far we move the price and quantity away from that “efficient” point, i.e. minimize the efficiency loss.

Efficiency loss (or dead weight loss): The loss of benefit (or surplus) from both the consumers and producers that comes from a tax being implemented- that is not tax revenue. When taxes are put in place they, by design, shift some of the “profit” and “savings” from the producers and consumers to the government, this is the tax revenue. However, they are not able to capture all of those losses, and the piece they do not capture is efficiency loss.

Elasticity: A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which individuals (consumers/producers) change their demand/amount supplied in response to price changes.iv So in this case, changes in price as a result of a tax being implemented.

Tax elasticity: Is a measure of how sensitive tax revenue is to fluctuations or changes in the economy. IT is calculated by percent change in tax revenue divided by percent change in income. Unit elastic (when elasticity equals one) implies it perfectly mimics changes in the economy (or income). It is inelastic when it is less than one and that means that tax growth falls behind income growth. It is elastic when the tax elasticity is greater than one and that means that tax revenue grows faster than income.

i Taken from: http://definitions.uslegal.com/d/dillons-rule/ ii Taken from: http://www.investopedia.com/terms/e/effectivetaxrate.asp iii Taken from: John Mikesell. Fiscal Administration: Analysis and Applications for the Public Sector, 8th Edition, by Thomson Wadsworth, 2011. iv Taken from: http://www.investopedia.com/terms/e/elasticity.asp