II Reading

Exercise2. Read and translate:

Text A

To tax (from the Latin taxo; "I estimate) is to impose a financial charge upon a taxpayer (an individual or legal entity) by a state such that failure to pay is punishable by law.

The main purpose of taxation is revenue: taxes raise money to spend on roads, schools and hospitals, and on more indirect government functions like market regulation or legal systems. This is the most widely known function. A second is redistribution. Normally, this means transferring wealth from the richer sections of society to poorer sections.

In modern taxation systems, taxes are levied in money. The method of taxation and the government expenditure of taxes raised is often highly debated in politics and economics. Tax collection is performed by a government agency. When taxes are not fully paid, civil penalties (such as fines) or criminal penalties may be imposed on the non-paying entity or individual.

There are three types of taxes according to the method of taxation in the United States: proportional, progressive and regressive. A proportional tax is one that imposes the same percentage rate of taxation on everyone, no matter what their income. Even when income goes up, the percent 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. For example, a person with a yearly income of $10,000 may spend $3,000 on food, clothing and medicine, while a person with a yearly income of $100,000 may spend $20,000 on the same essentials. If the state sales tax, which is a regressive tax, were 4 per cent, the person with the lower income would pay a lesser amount in dollars but a higher percentage of total income.

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. This is not an easy task but people seem to be more willing to pay taxes, when they 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. This criterion also includes convenience and efficiency. That is the tax should be administered at the lowest possible cost. A final criterion is fairness. Taxes should be imposed justly. However, this is hard to do because people do not always agree about what is or is not fair when it comes to taxes.

In general taxes are based chiefly on two principles: the Benefit Principle and the Ability-to-Pay Principle.

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. So the main basis for distributing taxes is income.