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When the government charges a tax on the income of individuals or businesses, this act is called an income tax. The government uses revenue from this tax to pay for governmental operations and programs.
Purpose
Without taxes, most governments would have a difficult time meeting the needs of their citizens. Roads, infrastructure, education, and other features of modern society would not be possible if income taxes were not collected by the government and applied toward these services.
Types of Taxation
There are three ways to pay taxes. Progressive tax payers pay their taxes based on the amount of income they make. Proportional taxation charges everybody the same fixed rate. Regressive tax charges all income earners the same flat rate. According to the IRS, all low-income earners will pay the most for this type of tax because they pay a larger share of their income.
Corporations
Corporations also pay large amounts of money for income taxes. The government usually taxes corporations on the amount of profits that they have earned during a given year.
Gross Income
Income that a corporation or an individual earns before taxes are taken out is considered gross income. Income taxes are taken from the gross income and what is left over for the corporation or the individual is the net earnings.
Tax Law
The United States bases its ability to collect income taxes from the Sixteenth Amendment of the U.S. Constitution.
Source:
Internal Revenue Service: Understanding Taxes
MSNBC: Where do My Income Taxes Go
Resource:
Where your Income Taxes Really Goes
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