One of the Fractured Fairy Tales shown on the offbeat Bullwinkle cartoon show of the 1960s featured a story about a man who moved to the town of Escrow. To make the story short, the man built a house and bad things happened to him. The moral of the fractured fairy tale was, "If someone tells you to put your house in Escrow, don't do it."

While many of the Bullwinkle segments turned on such puns, many over the heads of children watching the show, that one probably buzzed over the heads of most adults. Even after reading the dictionary definition of the term, its meaning is not at all clear.

Confusing Terms

Escrow is not the only confusing term when it comes to taxes. Terms such as “ad valorem,” “Keogh plan,” and even “dividend” might not mean much without a short course in tax preparation at the local community college.

However, ad valorem refers to a tax (such as local property tax) that varies based on the value of the item in question. This is used to explain why property taxes rise when the value of the property goes up. A Keogh plan is a retirement plan for people who are self-employed (or for unincorporated businesses) into which contributions are tax deferred. It also is called a "self-employed pension." Finally, a dividend is taxable money received from a profitable stock.

Other Key Terms

Other general key terms are “progressive” and “regressive” taxes. Progressive taxes are levies in which the wealthy pay a higher percentage than the less affluent. A regressive tax is just the opposite. In between the two is a flat tax, which is the same for everyone. The American federal income tax system is an example of a progressive tax system.

Other good tax terms are “exemption” and “deduction.” They both can refer to income that is not taxed. Exemptions are amounts not subject to tax and deductions represent money that can be recovered from tax withholdings. Withholdings, in turn, are what the government takes directly from a person's income, such as a regular paycheck. A complete list of tax terms is much too long for any one article. In fact, an online search for tax terms will turn up web sites that list other web sites that break down the terminology.

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