ad valorem
A tax charged as a percentage of value.
A tax levied as a proportion of value rather than per unit.
What that means in practice
Sales tax is the familiar example: the more the thing costs, the more tax it carries. It rises automatically with prices, which is why it does not need adjusting for inflation.
Ad valorem levies scale with the base automatically, so their real yield is inflation-neutral without legislative action — the principal structural contrast with specific taxes, whose real value declines absent indexation.
Questions people ask
Is this a rule, or just a way of describing something?
It is a way of understanding the system, not a rule in it. ad valorem has no rate. It explains how the rules that do have rates fit together.
Do I need to understand other terms before this one makes sense?
This one does not stand alone. Several related terms are linked below. ad valorem is easier to hold once they are in place.
Is this the standard name for it?
It is. ad valorem is the name this rule generally goes by. Searching it will find what you expect. That is not true of every tax term — some carry three names, depending on who is writing.
Is this a statutory term or an analytical one?
This is an analytical or procedural concept rather than a rate-bearing statutory provision. It applies across levels of government and tax types, and is used to interpret provisions that do carry rates rather than imposing liability itself.
What conceptual dependencies does this term carry?
This term has multiple conceptual dependencies, enumerated in the related-terms list. Definitions in tax law are frequently mutually referential — a provision's meaning depends on defined terms elsewhere in the code — so isolated reading commonly produces error.
Is this designation the settled one?
This designation is the settled term of art with limited alternative usage, so it maps reliably to statutory and agency references. Terms with multiple colloquial designations require more care when searching source material.