Taxation
Taxes of various types are a part of life today, from income taxes and property taxes to sales taxes and excise taxes. They are levied by different levels of government, from the local, to the state, and on to the federal government. Taxation is the financial levy imposed by a governmental authority upon individuals or corporations. Its purpose is to help pay for the cost of running society in terms of services like building roads and providing security and safety. In the U.S., taxes are collected primarily on the federal level, which is responsible for the income that funds most of the services.
At the federal level, taxes are imposed by Congress and come in the form of individual and corporate income taxes, payroll taxes, capital gains taxes, and estate taxes. Individuals have a certain amount of money per year that is not subject to taxation, known as a standard deduction. Those who make more than the standard deduction amount then have to pay taxes on their additional income. Typically the federal income tax is progressive, meaning that the more money you make, the higher percentage of your income you will pay in taxes.
For corporations, taxes usually come in the form of corporate income tax. The rules for corporations can be more complicated than for individuals, as there are numerous deductions and exemptions that can reduce their tax liability. Corporations must also keep records of financials such as profits and losses to more easily comply with the tax law.
In addition to federal taxes, states impose their own taxes as well. These can include income taxes, estate taxes, and sales taxes. Sales taxes are the most common of these, as they are charged on most goods and services that are purchased. Most states allow local governments to add their own taxes to the sales tax, making it even higher. Other taxes are also imposed by states, such as luxury taxes or gas taxes.
Taxes can be used to fund many different services and programs. For example, taxes may be used to pay for infrastructure development, public schools, and public safety. Taxes are also used to fund programs that help the welfare of citizens, like Social Security and Medicare. Taxes are also used to provide services to the public, such as public transportation, roads, and parks.
Taxes are an important part of modern life and it is important to understand their purpose and learn how to comply with them. They are the main source of income for the government and are essential for running society and providing services to the citizens. A thorough understanding of the tax system is beneficial to all taxpayers.
