The Three Basic Tax Types

• Taxes have a much bigger impact on our lives beyond just paying a little more for the things we buy. The better you understand them, the better equipped you are to make decisions about them.
• All taxes can be divided into three basic types: taxes on what you buy, taxes on what you earn, and taxes on what you own.
  • Sales taxes are paid by the consumer when buying most goods and services. These taxes provide state and local revenue, funding services like education, transportation, and health care.
  • Income taxes are paid on many sources of income you might earn, like the taxes taken directly from your paycheck. They are major sources of revenue for the federal government, many state governments, and a few local governments.
  • Property taxes generate revenue at a local level. They provide funding for everything from parks, to public safety services, to additional funding for schools.
• It’s important to remember that every dollar you pay in taxes starts as a dollar earned as income. One of the main differences among the tax types outlined below is the point of collection—in other words, when you pay the tax.
  • For example, if you earn $1,000 in a state with a flat income tax rate of 10%, $100 in income taxes should be withheld from your paycheck when you earn that income.
  • If, a week later, you take $100 from your remaining earnings to purchase a new smartwatch in a jurisdiction with a 5% sales tax, you’ll pay an additional $5 in taxes when you purchase that item.
  • Altogether, $105 of your initial $1,000 in income has been collected in taxes, just not at the same time.
• Tax structures and levels vary greatly among U.S. states and countries, as do the services they fund.
• Every dollar you pay in taxes affects how much of your income you get to keep, save, and spend, so understanding each tax type can help you make better decisions about everything from which job to take, to where to live, to how you vote.

One of the first lessons you learn about money as a kid is that the price on the tag may not be the same as the price on the receipt. Why? Taxes.

Taxes have a much bigger impact on our lives beyond just paying a little more for the things we buy.

And the better you understand them, the better equipped you are to make decisions about them.

All taxes can be divided into three basic types: taxes on what you buy, taxes on what you earn, and taxes on what you own.

Every dollar you pay in taxes starts as a dollar earned as income. The main difference is the point of collection.

Sales taxes are paid by the consumer when buying most goods and services.

These taxes provide state and local revenue, funding services like education, transportation, and health care.

The Individual Income Tax is a tax paid on many sources of income you might earn, like the taxes taken directly from your paycheck.

Income taxes are major sources of revenue for the federal government and many state governments.

The third type of taxes are taxes on what you own—like homes, land, or vehicles—known as property taxes.

Property taxes generate revenue at a local level. They provide funding for everything from parks, to public safety services, to additional funding for schools.

Every dollar you pay in taxes affects how much of your income you get to keep, save, and spend.

So, understanding each tax type can help you make better decisions about everything from which job to take, to where to live, to how you vote.

Sales Tax

July 27, 2020

Individual Income Tax

July 27, 2020

Property Tax

July 27, 2020

Corporate Income Tax

July 27, 2020

Payroll Tax

July 27, 2020

Capital Gains Tax

July 27, 2020

Gross Receipts Tax

July 27, 2020

Value-Added Tax (VAT)

July 27, 2020

Excise Tax

July 27, 2020

Estate Tax

July 27, 2020

Inheritance Tax

July 27, 2020

Wealth Tax

July 27, 2020