TAX stands for Tax Administration. A tax is any type of legal levy or financial burden imposed upon a taxpayer by an administrative body designed to finance various public expenditures and government spending. A tax may be imposed for any purpose including the payment of debt, payment of interest and taxes, or repayment of principal and interest on loans. Failure to pay, evasion of or disobedience to tax, and fraudulency in paying tax are punishable by law.
Generally, a tax system is progressive in nature. The rates of tax increase with income and decrease with income. In such a progressive tax system, the highest marginal rate of tax is levied at the very top of the scale and gradually gets progressively lower as one moves towards the next level. As income increases, so does the marginal rate of taxation. This is known as the “proportional tax system”.
There are many types of indirect taxes. These include property tax, sales tax credit, vehicle registration tax, and income tax. The term “inflation tax” refers to a tax due on increases in prices of commodities with respect to which the indirect taxation is imposed. The term “correlated multiplicity” refers to the combined effects of several direct and indirect taxes, resulting in an annual increase in taxable income that is not directly proportional to the increase in taxable income. Examples of these types of taxes are: Income tax, corporate tax, and sales tax.
Income-based regressive taxes are regressive in nature, since the threshold amount of taxation is lower at the low end than the high end. Sales tax and corporate tax are regressive in nature since the base rate for both sales taxes and corporate taxes are very high. In addition, estate and gift taxes are regressive in nature because the incomes of estates and gift recipients tend to exceed the incomes of workers, making these taxes highly regressive.
Property-based regressive taxes are basically sales taxes with respect to personal property such as houses, and other non-personal assets. The rate of taxation of such assets is based on the current market value of the property. In addition, there are exemptions that certain individuals and businesses are entitled to in order to reduce the property-based regressive tax liability. Business deductions and personal exemptions are regressive in nature since they lower the overall rate of taxation on most personal properties. Additionally, property taxes are generally based on the current value of the land.
One of the most regressive forms of taxation is the regressive collection of customs duties and Excise taxes. These two forms of customs duties and excise taxes are designed to provide the revenue for the federal government. However, unlike sales and corporate taxes which are proportional in nature, customs duties and excise fees are collected based on the percentage of total goods sold that are imported into the U.S., rather than based on the actual purchase price of imported goods. Thus, because of their progressive nature, customs and excise fees and the like constitute a form of regressive taxation.