Tax legislation is the set of laws that govern the payment of taxes from individuals and businesses to the government. The government uses the taxes paid by individuals and businesses to fund the public works of that particular governmental entity, such as a city, county, state, or country. Governments implement taxes in a number of ways throughout the world. One similarity in tax legislation worldwide is that almost all nations levy taxes in one form or another. The assessment of taxes is often the main source of revenue for many governments.
There are many different methods that a local or national governmental entity can use to collect taxes from its constituents. In the United States, for example, the most common tax is the income tax, or a tax that an individual’s local, state, and federal government assesses on his or her income. Income tax can constitute a large portion of an individual’s income, so most individuals in the United States take all measures to minimize their taxes throughout the tax year.
Another way that governmental entities can assess taxes is through taxing products for sale, commonly known as a sales tax. Nations also may levy higher tax rates on certain products, such as alcohol and cigarettes, and these taxes are sometimes referred to as sin taxes. Many employees pay payroll taxes that support a variety of governmental initiatives, such as public defense, education, and other public works. Other common types of tax legislation include excise taxes, tariffs, inheritance taxes, and property taxes. These tax laws may or may not exist in a certain country, due to the diversity of tax legislation throughout the world.
The type of tax legislation and the amount of tax rates varies widely from one country to the next or from one local region to another. In the United States, for example, most states assess income taxes, but residents of the state of Florida pay no state income taxes at all. The tax rates of different nations differ substantially on different types of products and actions. A heavily taxed imported product in the United States, for instance, may not be taxable at all in another country. These differences are particularly important for people and corporations that work or do business in more than one state or country. Calculating all the taxes that an individual or business owes can be difficult, and it is often best left to tax professionals.
