Taxes are the old traditional method of serving the native people. Government and tribes collected the taxes from people and spent on their wellness and better facilities. However after the industry revolutions, the financial system and government policies have been changed. There are a whole new bunch of tax informed and different ways to pay them. In this article, we will learn about five reasons why we pay taxes, who decides taxes, and the difference between taxes and bills. Whether you are a financial student or just bombarded with the tax, we are here to help you.

What is Tax and its Types:

In this section, provide a brief overview of taxation and its significance in economic systems. Explain the concept of taxation and its role in generating revenue for governments.

Here are some basic and common tax types:

1. Income Tax: Income tax is the most common tax type, and only qualified people will pay it. In income tax, the government will cut some portion of your income. The baseline of the tax depends upon several factors like marital status, total income asset acquired, and non-filer profile. 

You can check your status by clicking on this link, filling out the form, and evaluating your tax profile.
https://turbotax.intuit.com/lp/ppc/2541?srqs=null&cid=ppc_gg_nb_stan_all_na_Calculator-CalculatorEstimateBrackets-Calculator-Exact_TY23-bu3-sb87_682717607481_142194611205_kwd-327918176360&srid=Cj0KCQiAsburBhCIARIsAExmsu6iFzHFnEEdooIWBn3IDmxmskj-2KMWwo4NuUIHCg7GnoTddmx2GkcaAsZyEALw_wcB&targetid=kwd-327918176360&skw=estimated%20income%20tax%20calculator&adid=682717607481&ven=gg&gad_source=1&gclid=Cj0KCQiAsburBhCIARIsAExmsu6iFzHFnEEdooIWBn3IDmxmskj-2KMWwo4NuUIHCg7GnoTddmx2GkcaAsZyEALw_wcB&gclsrc=aw.ds

2. Payroll Tax: Payroll tax is a kind of corporate tax in which the employer takes a portion of the salary of the employee. Employers pay to the government for medical and social securities funds. In the USA, the employee will pay 1.45% on their Medicare and 6.2% for social security on every $160,200 earned. 

3. Corporate Tax: The government takes a percentage amount from corporations to fund public programs. In the USA, Congress has passed the 15% minimum tax into law as a part of the Inflation Reduction Act 2022. For the USA local corporations, the baseline is $1 Billion for a three-year book and $100 million for the foreign corporations.

4. Sales Tax: Sales tax is applicable when we buy or sell any product. Generally, the government deducts some percentage from individual sales transactions. The government and its relevant departments decide the sales tax percentage. The highest sales tax percentage recorded in 2022 was 9.55% in Tennessee.

5. Property Tax: Property tax is a tax that is based on the market value of real estate. It includes things like buildings and land that can’t be moved. Local governments, such as cities, counties, and other regional bodies, usually charge it. The assessed value of the land, which local assessors set, is often used to determine the due property tax.

5 Reasons Why We Pay Tax

Paying taxes is an important part of living in the modern world. The governments need tax money to do many things, including basic services. Here are the 5 reasons why we pay tax:

1. Services and public infrastructure: Taxes are the main way local, regional, and national governments get money. Taxes bring the money to pay for public services and build and keep infrastructure. It includes general safety such as (police and fire services), sanitation, healthcare, transportation, education, and more.
2. Programs for social welfare: Tax amounts help the programs for social welfare that help weak people. Some examples of this are food stamps, welfare, jobless benefits, and other programs. This helps people to escape poverty and live better lives.
3. Supporting Defense and National Security: Defense and national security projects are paid for by taxes. Spending like keeping the military, intelligence agencies, and other parts of national defense in good shape. Protecting people and the country’s interests at home and abroad is an important function paid for by taxes.
4. Law and Order: The police, courts, and prisons are all part of the legal and judicial processes paid for by taxes. Society needs these services to keep peace, do justice, and support the rule of law.
5. Common Resources and Public Goods: Tax money provides everyone with common resources and public goods. Public goods, like clean air, public parks, and environmental protection, usually need to be paid for by everyone through taxes. This is because they are non-excludable and non-rivalrous, meaning everyone benefits from them. It’s hard to stop people from having those benefits.

Difference Between Taxes and Other Payments?

Taxes and bills are different financial ideas with different meanings and effects. Taxes are mandatory financial charges that the government puts on people to pay for public services and facilities. Paying them is necessary to avoid legal issues. Some popular taxes are Income tax and land tax. 

On the other hand, bills are optional requests for sent payment by businesses or service providers for goods. Some specific transactions go with bills, like utility bills or invoices for services performed. People usually don’t need to pay bills, unlike taxes. Private businesses are responsible for paying the bills. Taxes pay for government services, while bills cover the costs of personal goods and services.

Conclusion

Taxes have been a way to support government activities and public services for a long time. Taxation forms a crucial component of society, requiring citizens to fulfill their obligation to contribute. As previously mentioned, taxes serve a vital role in financing essential services such as social welfare, national defense, law enforcement, and public resources. Tax systems change over time to reflect economic conditions and government policy changes. Governments utilize various types of taxes, including income tax, payroll tax, business tax, sales tax, and property tax, to fund different initiatives and services.

It is very important to know the difference between taxes and bills. Taxes are the payment that every individual has to pay to the government for public betterment, while bills are payments for specific goods or services bought from private businesses.

As we learn about the complicated world of taxes, whether we are students of finance or regular people who have to pay taxes. This source of money helps the governments meet public needs, keep infrastructure in good shape, and take care of their people. In conclusion, paying taxes is a civil duty that keeps our towns running and improving, leading to a more prosperous and well-supported society.