Understanding Taxes - Theme 2: Taxes in U.S. History (2024)

FAQs

What are the goals behind taxes theme 2 taxes in U.S. history? ›

U.S. Constitution

American lawmakers have always worked to balance three goals in the process of creating taxes-to build revenue, to influence people's spending habits, and to be fair to all taxpayers.

Taxes are required payments of money to governments, which use the funds to provide public goods and services for the benefit of the community as a whole.

Estate and gift taxes impose a tax on wealth when it is transferred, though they generally apply only to the very wealthy. Property taxes apply to the value of one specific type of asset: real estate. Capital gains and dividend taxes apply to investment income.

Taxes provide revenue for federal, local, and state governments to fund essential services--defense, highways, police, a justice system--that benefit all citizens, who could not provide such services very effectively for themselves.

One useful way to view the purpose of taxation, attributable to American economist Richard A. Musgrave, is to distinguish between objectives of resource allocation, income redistribution, and economic stability.

Direct and indirect taxes

Taxes are most commonly classified as either direct or indirect, an example of the former type being the income tax and of the latter the sales tax.

Taxes are mandatory contributions levied on individuals or corporations by a government entity—whether local, regional, or national. Tax revenues finance government activities, including public works and services such as roads and schools, or programs such as Social Security and Medicare.

A tax is a mandatory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization to collectively fund government spending, public expenditures, or as a way to regulate and reduce negative externalities.

High-Income Taxpayers Paid the Majority of Federal Income Taxes. In 2021, the bottom half of taxpayers earned 10.4 percent of total AGI and paid 2.3 percent of all federal individual income taxes. The top 1 percent earned 26.3 percent of total AGI and paid 45.8 percent of all federal income taxes.

Understanding Wealth Taxes

An ad valorem tax on real estate and an intangible tax on financial assets are both examples of a wealth tax.

What share of taxes do the rich pay? ›

In 2021, the latest year with available data, the top 1 percent of income earners earned 26 percent of all income and paid 46 percent of all federal income taxes – more than the bottom 95 percent combined (33 percent).

But not all taxes are equal, and it's important how a tax works. Some taxes are harder to implement than others, and some create greater economic distortions. Based on both of these criteria, taxing wealth — including unrealized gains — is the worst way to tax.

Texas pays an exorbitant $17B in excise taxes to the federal government – more than any other state by far and more than the income taxes on Texas's top 1% of earners.

If you don't pay your taxes on time, the IRS begins charging penalties and interest on the tax you owe as soon as the tax deadline passes. It can also begin collection actions against you that include tax liens and seizure of assets.

The United States Constitution, Article 1, Section 8, Clause 1, states, “The Congress shall have the Power to lay and collect Taxes, Duties, Imposts and Excises to pay the Debts and provide for the common Defense and general Welfare of the United States.

The primary goal of a national tax system is to generate revenues to pay for the expenditures of government at all levels. Because public expenditures tend to grow at least as fast as the national product, taxes, as the main vehicle of government finance, should produce revenues that grow correspondingly.

Rather than making fiscally unsustainable tax cuts permanent, let us remember that taxes are collected for a reason: to provide vital public services such as a strong defense, homeland security, healthcare, retirement and income security, education and training, and disaster relief.

The purpose of taxes is to raise needed revenue, not to favor or punish specific industries, activities, and products. Minimizing tax preferences broadens the tax base, so that the government can raise sufficient revenue with lower rates.

The most important purpose of tax research is to find solutions to the tax problems of your clients or employer. The process is similar to traditional legal research. The researcher must find authority, check the usefulness of that authority, and apply the results of the research to a specific situation.