Taxes

What are Taxes? Taxes are payments that people are required to pay to a local, state, or national government.

Taxes supply revenue to provide goods and services that people expect from the government. The US Constitution grants Congress the power to tax, but also limits the kinds of taxes that Congress can impose.

When government creates a tax, it decides on the type of tax base – the income, property, good, or service that is subject to the tax. It also decides how to structure the tax.

There are three basic kinds of tax structures: proportional, progressive, and regressive.

A proportional tax is a tax in which the percentage of income paid in taxes remains the same for all income levels.

A progressive tax is one in which the percentage increases at higher income levels. Individual income tax is an example of a progressive tax because people with higher income levels pay a higher percentage of their incomes in taxes.

In a regressive tax, the percentage increases at lower income levels. A sales tax is an example of a regressive tax because the sales tax is established and everyone pays the same amount (depending on their purchases), but those with lower incomes end up paying a greater percentage of their incomes to pay these taxes.

Examples of Taxes Personal Income Tax – comes from your paycheck; Biggest source of revenue for Federal govt Corporate Income Tax – paid on profits from corporations Tariff – paid on something that is imported Social Security – from paychecks Excise tax – gasoline, tobacco, alcohol, phones

State Taxes Texas is one of 7 states in which citizens don’t pay state income state as well as federal Sales tax – Texas has it set at.07 /1.00; paid on everything but unprepared food, water, and medicine Property Tax – paid to Local govt; based on the value of the house, building, or land