Who Needs to Pay Income Tax?

Governments need some form of income to pay for the services offered to citizens. Taxes are the most common form of income generation for governments. The question is more who must pay taxes rather than who needs to pay taxes.

Individuals

Most individuals earning wages or compensation must pay a portion of this income as federal and state taxes. In the United States, a progressive tax system requires higher taxes as individuals earn more money. Individuals may also pay state taxes for local services.

Businesses

Businesses typically have different tax rates or deductions than individuals. Publicly held companies must pay taxes at a corporate rate, along with other taxes or fees for operating in the business environment.

Considerations

Prior to 1913, federal taxation was not common in the United States. The government implemented taxes as needed and repealed them after the need for income dissipated. While not ideal for paying for services, it was an indication that citizens did not need to pay income tax for services.

References

• National Taxpayers Union: Who Pays Income Taxes?
• U.S. Treasury: Fact Sheets: Taxes