Editorial, Rje Vol: 5 Issue: 12
Different Types of Taxation
Dale Pinto*
Department of Economics, Federal University of Minas Gerais, Belo Horizonte, Brazil
*Corresponding Author: Dale Pinto,
Department of Economics, Federal University of Minas Gerais, Belo Horizonte, Brazil,
E-mail:dale@gmail.com
Received date: December 08, 2021; Accepted date: December 22, 2021; Published date: December 30, 2021
Keywords: Economics
Editorial Note
An amount of money levied by a government on its citizens and
used to run the government, the country, a state, a county, or a
municipality is called Tax. Taxation, a system of raising money to
finance the government. All governments require payments of money
taxes from people. Governments use tax revenues to pay soldiers and
police, to build dams and roads, to operate schools and hospitals, to
provide food to the poor and medical care to the elderly, and for
hundreds of other purposes. Without taxes to fund its activities, the
government could not exist. Taxation is the most important source of
revenues for modern governments, typically accounting for 90 percent
or more of their income. The remainder of government revenue comes
from borrowing and from charging fees for services. A proportional
tax takes the same percentage of income from all people. A
proportional tax is one in which whatever the size of income, same
rate or same proportional % is charged. If all taxpayers have to pay to
say 1% of their income as the tax is known as the Proportional tax. A
progressive tax takes a higher percentage of income as income rises
rich people not only pay a larger amount of money than poor people
but a larger fraction of their incomes. The principle is �??higher the
income; higher the rate. A regressive tax takes a smaller percentage of
income as income rises poor people pay a larger fraction of their
incomes in taxes than rich people. It is the opposite of the progressive
tax. Community tax, when government increases sugar rate from 60
Rs/kg to 70 Rs/kg, it is for both poor and rich but it is the burden on
poor people. A tax is called digressive when the higher incomes do not
make a due sacrifice, or when the burden imposed on them is
relatively less i.e. the tax may be progressive up to a certain limit
beyond which a uniform rate is changed. So there will be a lower
relative sacrifice on the larger incomes than on the smaller incomes.
Governments impose many types of taxes. In most developed
countries, individuals pay income taxes when they earn money,
consumption taxes when they spend it, property taxes when they own
a home or land, and in some cases estate taxes when they die. An
individual income tax, also called a personal income tax, is a tax on a
person�??s income. Income includes wages, salaries, and other earnings
from one�??s occupation; interest earned by savings accounts and certain
types of bonds; rents (earnings from rented properties); royalties
earned on sales of patented or copyrighted items, such as inventions
and books; and dividends from stock. Income also includes capital
gains, which are profits from the sale of stock, real estate, or other
investments whose value has increased over time. Each taxpayer must
compute his or her tax liability the amount of money he or she owes
the government. (This computation involves four major steps. The
taxpayer computes adjusted gross income one�??s income from all
taxable sources minus certain expenses incurred in earning that
income. The taxpayer converts adjusted gross income to taxable
income the amount of income subject to tax by subtracting various
amounts called exemptions and deductions. Some deductions exist to
enhance the fairness of the tax system. For example, the U.S.
government permits a deduction for extraordinarily high medical
expenses. Other deductions are allowed to encourage certain kinds of
behavior. For example, some governments permit deductions of
charitable contributions as an incentive for individuals to give money
to worthy causes.
Consumption Taxes
The taxpayer calculates the amount of tax due by consulting a tax
table, which shows the exact amount of tax due for most levels of
taxable income. People with very high incomes consult a rate
schedule, a list of tax rates for different ranges of taxable income, to
compute the amount of tax due. The taxpayer subtracts taxes paid
during the year and any allowable tax credits to arrive at final tax
liability). After computing the amount of tax due, the taxpayer must
send this information to the government and enclose the amount due.
In 2001 the average taxpayer in the United States paid about 15
percent of his or her income in income taxes.
