The Purpose of Income Tax

Many people wonder about the purpose of income tax. While nobody enjoys paying taxes, taxes are a necessary part of running any governmental entity. An income tax is deemed to be the most fair as well as the easiest way to pay taxes across various income levels because the tax is paid before the employee ever puts the money into his own pocket.

Governmental Funding

Governments need money in order to function. Revenue is required to pay for everything from police officer salaries to paving roads.

Federal Funding

Reviewing federal income tax returns annually is much less burdensome on the federal government than having to manage other types of taxes, such as sales, property or estate tax.

State Funding

State governments that do not impose an income tax must raise revenue in other ways, such as through sales, property or estate taxes. Buying goods or owning property becomes much more expensive in these states.

Proportionate Burden

Taxes such as the sales tax impose a higher percentage burden on people with lower incomes. An income tax seeks to equalize the tax burden by having each citizen pay a similar percentage of income.

Up Front Payment

Because income ia taxed as it is earned, citizens already have the funds available to pay the government. People notice the tax burden less when it does not enter their pockets first.

Resources

• History of the U.S. Tax System