19. Taxation
Taxation is a system of raising money to finance government. All governments require payments of money – taxes – from people. Without taxes to found its activities, government could not exist.
Throughout history, people have debated the amount and kinds of taxes that a government should impose. In political campaigns, candidates views on taxation may, partly determine their popularity with voters.
Taxation is the most important source of revenues for modem governments. The remainder of government revenue comes from borrowing and from in the amount of taxes they collect.
Governments may raise or lower taxes to achieve social and economic objectives or to achieve political popularity with certain groups. Taxation can redistribute a society’s wealth by imposing a heavier tax burden on one group in order to found services for another.
Taxation is an important tool for maintaining the stability of a country’s economy.
20. TAXATION in USA and GREAT BRITAIN
There are three types of taxes in the United States: proportional, progressive and regressive.
A proportional tax is one that imposes the same percentage rate of taxation1 on everyone, no matter what their income2. Even when income goes up, the per cent of total income paid in taxes does not change.
A progressive tax is one that imposes a higher percentage rate of taxation of people with high incomes than on those with low incomes.
A regressive tax is one that imposes a higher percentage rate of taxation on low incomes than on high incomes.
In order to have an effective tax system, government must have criteria or standards. One such criterion is that a tax yields enough revenue.
A second criterion is clarity. Tax laws should be written so that both the taxpayer and tax-collector can understand them.
A third criterion is ease of administration. A tax should be easy to collect. It should not require a large enforcement staff, and it should be designed so that citizens find it hard to avoid.
In general taxes are based chiefly on two principles: the Benefit Principle3 and the Ability-to-Pay Principle4.
The Benefit Principle of taxation is based on two ideas. First, those who benefit from government services should be the ones to pay for them. Second, people should pay taxes in proportion to the amount of services or benefits they receive.
The Ability-to-Pay Principle of taxation says that people should be taxed according to their ability to pay, no matter what benefits or services they receive. This principle is based on three things. First it is not possible to measure benefits, derived from government spending. Second, people with higher incomes suffer less discomfort than people with lower incomes even if they pay higher taxes. Finally, the only means most people have of paying taxes is the income they earn. Since the benefits of government services to individuals are hard to measure, the other basis for distributing taxes is income.