Income Tax in America
Taxation in America
In its quest to raise monies to support public spending, the government employs a couple of methods which only differ depending on their characteristics. First, there is the use of taxes. Taxes come in various forms such a: income tax which is a tax charged on the net salary earned by an individual. Corporate tax is the tax companies are charged based on the profit they earn. Sales tax is charged on any amount earned from sales transactions and property tax is charged from the value of a given real estate (Duff, 2004). Second, a government can also raise funds by charging user fees. Individuals are charged these fees for the benefits derived from using certain government facilities. The more one uses them, the higher the fees charged. If an individual does not use these facilities, no fee is charged. Lastly, a government can raise funds through penalties from the regulation of civil and criminal activities (Sun & Jung, 2012).
Origin of Income Tax in America
The first ever tax paid on income was during the reign of President Abraham Lincoln. This tax was occasioned by there being a civil war in the country. To cater for expenses incurred during the war, a tax was to be charged on the wages earned by an individual. It was meant to support war efforts. Later the tax was passed in congress and was to be levied on citizens at a uniform rate (Duff, 2004). The Supreme Court later termed the tax a violation of the constitution after it was pointed out that a few states paid tax greater than half the total of the whole country. Later, the sixteenth amendment was passed. This allowed individual states to levy income tax on individual state members without taking into account its total population. This tax was to be collected at the origin and formed the basis for the individual income tax collected by the government today.
Government Justification for Taxation
The government gives several reasons to justify taxation on its citizens. Taxation is a critical tool to measure accountability. There exists a relationship between the amount of taxes collected by the government and the amount the government spends in providing essential commodities and services to its population. Analysis of these taxes is very important in determining accountability by the government in public services provision. This analysis thus provides an important source of information to participants in the electoral process. Some public resources also need to be increased constantly as the population and users increase (Duff, 2004). These include resources such as roads. With an increased population, there is additional pressure in these resources. The government therefore in formulating the costs using these facilities factors in a tax such that there is a provision for the expansion of these resources. Activities that may be viewed as having harmful consequences on the population also do attract taxes from the government so as to minimize or prohibit them. For example industries with processes or products that pollute the environment will attract extra or hefty fines compared to other industries. This serves to discourage new firms from joining this industry to add to the pollution and the money collected from existing firms is channeled to alleviating those effects. The government ensures its economy remains stable by means of taxes.
When the economy is doing too well, there is a lot of money in circulation and people have extra money to spend. This could easily lead to inflation (Duff, 2004). To remedy this, the government will increase the amount of taxes paid. This will reduce the spending and regularize the economy. I case the economy is failing, the government injects money into the economy to cushion the citizens. Thus, taxation provides a very useful tool for the government in economic regulation. Taxation is also very important in ensuring social equity in a nation. Through progressive taxation, individuals are taxed based on their levels of income and wealth. Households earning high amounts of income are taxed more compared to families with low incomes (Sun & Jung, 2012). The extra money earned from taxing families with high levels of income can be used to uplift the living standards of low-income families promoting social equity.
Conclusion.
In conclusion, it is prudent by the government to tax some items more than others. A good example would be the decision by a government to tax foreign products more than local products. Any other move would be counterproductive. By taxing incoming products more, the local industry is protected as individuals are discouraged from exporting non local products. However, careful guidelines and procedures on which items attract more tax and calculation of the extra tax should be provided and the public educated as well. This goes a long way in avoiding unwanted results from such a move. These unwanted results may include an increase in tax-related crimes such as tax evasion or motivating the wealthy to move their monies to offshore accounts.
References.
Duff, D. G. (2004). Benefit Taxes and User Fees in Theory and Practice. University of Toronto Law Journal, 391-447. Retrieved from https://www.jstor.org/stable/pdf/4144930.pdf?seq=1
Sun, R., & Jung, C. (2012). Does user-change financing reduce expenditure levels for the charge-financed services? The American Review of Public Administration, 170-185. Retrieved from https://journals.sagepub.com/doi/abs/10.1177/0275074011399753