David Bjornson talks about the different forms of taxation. Taxation is the process or means by collection of money to the necessary expenses of the government. It protects local industries against foreign competition through setting of high obligations on imported goods. It reduces inequalities in wealth and income by imposing progressively higher taxes and  prevents inflation by increasing taxes or ward off depression by decreasing taxes. Lawmakers have three needs in mind as they prepare tax laws; the need to raise revenue, the need to be fair to taxpayers, and the need to influence taxpayers’ behavior.

Taxes are mainly used to finance the expenses earned by the government to manage an economy. Taxes act as a way to shift some of the wealth from those with more to those with less. It is the main source of income to finance the government in disbursing their services and infrastructure. It strengthens enterprises by giving tax exemptions.

Below are three excise taxes that have influenced the economy and consumers’ behaviors.

Sin tax

Used to prevent the use of products and services that could risk someone’s health, such as alcohol and cigarettes.

Gasoline excise tax

A user tax on gasoline purchases which revenues maintain and build roads and highways and regulate underground pollution related to gas storage.

Luxury taxes

Taxes on expensive, nonessential items, such as luxury cars which is redistributed through government programs that benefit all citizens.

A business must pay taxes based on the company’s physical location, ownership structure and nature of the business. Business taxes can have a huge impact on the profitability of businesses and the amount of business asset. Taxation is a very important factor in the financial investment decision-making process because a lower tax freight allows the company to lower prices or generate higher revenue, which can then be paid out in wages, salaries and/or dividends. Businesses may be required to pay the following types of taxes:

Federal Income tax

A tax charged by a national government on annual income.

State and/or Local Income tax

A tax charged by a state or local government on annual income. Not all states have applied state level income taxes.

Payroll tax 

An employer’s pay on behalf of their employees based on the wage or salary of the employee.

Unemployment tax 

A federal tax that is distributed to state unemployment agencies to fund unemployment assistance for laid-off workers.

Sales tax

A tax forced by the government at the point of sale on retail goods and services. It is collected by the retailer and hand out to the state.

Foreign tax

An income taxes paid to a foreign government on income obtained in that country.

Value-Added tax 

A national sales tax collected through consumption of goods. Depending on the political climate, the taxing control often exempts assured necessary living items, such as food and medicine.

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