New investors will quickly run across the terms small-, mid- and large-cap companies, and they might wonder why a company is wearing a cap – of any size.

The term means market capitalization – the market value of all of a company’s existing shares. It is basically a company’s shares multiplied by the current market price of one share. Investors gauge a company’s price by this rather than by sales or assets. It is also an effective way to see how the economic downturn of 2008 affected the financial world. The total market capitalization was as high as $57.5 trillion in May 2008, slid to $50 trillion in August and then went down to $40 trillion in September 2008, according to the World Federation of Exchanges.

There are no hard rules about the values of each designation. One gauge says small-caps are less than $2 billion in value, mid-caps are up to $10 billion and large-caps are more than $10 billion. Others say mid-caps start at $5 billion and small-caps start at $1 billion. And still others have added more categories: mega-caps, more than $200 billion; micro-caps, $50 million to $300 million; and nano-caps, below $50 million.

The size makes a difference in investor expectation. Small-cap stock values can grow or shrink quickly. The gain may be great, but so is the risk. These companies can grow into mid- and large-cap companies, taking investors along for the ride. But they also have less to fall back on when times are tough. They can drop in a hurry, again taking their investors with them.

Large-cap companies, which make up half of total market capitalization, tend to be steady in their performance. They are usually the companies that dominate their industry and are not likely to grow any more enormous by percentage, or to shrink, for that matter. These entities are often devoted to maintaining their position. So the investments are usually steady.

Mid-caps are considered a mix of small-cap and large-cap. They often have ambitions to grow into a large-cap, but that drive can also lead them to take risks. The companies are still substantial and are not likely to take ill-advised risks.

Investors should assess their risk tolerance before deciding to invest in stocks. Then they can determine which class of companies to put their money into. Many mutual funds specialize in different groups, so investors can take advantage of company size characteristics but spread the risk at the same time. The funds that track indexes such as the S&P 500 focus on large- or mega-cap companies, which offer stability and slower growth. They usually stumble only in significant downturns such as those after the 9/11 attack and the financial meltdown of 2008.

The growth in national debt has been accompanied by an increase in discussion of new taxes. One of the latest ideas getting attention is the value-added tax, or VAT.

The VAT is basically a national sales tax and is common in most other countries. France, for example, derives half its revenue from the VAT.

Although it looks like a sales tax, there is a key difference. The VAT is applied throughout the production and sales cycle as value is added to the product. Original producers charge a tax to manufacturers, who charge retailers, who charge consumers. Each tax can be deducted from the next tax, which is supposed to reduce the impact on the consumer. It is important not only because it spreads the tax throughout the production and sales system, but also because it  helps keep the end sales tax below 10 percent, which is considered the limit of consumer acceptance. Above that, according to economic theory, more people figure out ways to evade the tax.

This is generally how the VAT works in European countries, where it adds 10 percent to 20 percent to purchases, although not all at once. The taxes also can be assessed differently, so, for example, food could be taxed at a lower rate than other goods.

Some like the VAT because it taxes consumption rather than income. Some argue that an income tax penalizes achievement because it taxes wage growth and investment. But others argue that consumption taxes penalize lower-wage earners because consumption eats up more of their income. So the tax would be a larger proportion of their spending. Income taxes are generally considered progressive, and consumption taxes are regressive.

People across the political spectrum are considering the tax, partly because it can be used to replace other taxes, such as corporate taxes, that are considered more onerous. Besides general opposition to consumption taxes and, of course, to taxes in total, a key argument against the VAT is that it does not address the problem of overspending. Many people say that rather than figuring out how to fund growing government, government should figure out how to stop growing. Others say this is unrealistic, given the inevitable increase in Medicare and Social Security alone, and that a more equitable way to pay for government spending should be devised.

The VAT tax is likely to get more attention over the coming months, because Congress and the Obama administration have been asking for studies on its impact as a basis for future policy.

One of the key parts of health care reform was the establishment of health insurance exchanges, which states would have to set up by 2014, the year in which most of the law’s provisions go into effect.

The exchange is intended to create a more organized and competitive market by establishing standard levels of health insurance plans – labeled platinum, gold, silver and bronze – according to federal rules. With plans offering required benefits, they could be compared with each other. An exchange is supposed to encourage lower prices through retail competition and make it easier for individuals and small groups to shop for insurance. It also makes the coverage portable, because a policy sold through the exchange would not be tied to employment.

Those who can shop in the exchanges are:

• Workers at companies with fewer than 100 employees
• Workers at companies that do not provide health insurance
• People who are self-employed
• People who are unemployed
• Retirees who are not eligible for Medicare.
• Small businesses
• Medium-size and large businesses, after 2017

Exchanges are required to make certain that policies are “in the interest” of buyers. The exchanges cannot set premiums, but they can reject plans if companies cannot successfully justify rate increases. By 2014, companies will not be able to discriminate against those with pre-existing conditions.

If a state opts out entirely, the federal government would be able to set up an exchange.

The legal and tax information contained in these articles is merely a summary of our understanding and interpretation of some current provisions of tax law and is not exhaustive. Consult your legal or tax advisor for advice concerning your particular circumstances.