Taxes are the primary source of revenue for most governments. They fund critical aspects of a nation’s development such as infrastructure, healthcare and education. Having a basic understanding of Tax* planning can help individuals save money and be responsible citizens.
The income tax is the main source of revenue for most governments and is levied against both individuals and corporations. Individuals have a number of deductions and credits available to them, which reduce their taxable income. A person’s filing status (single, married filing jointly, head of household or married filing separately) and taxable income determine their income tax bracket. Once a taxpayer determines their taxable income, they can apply the appropriate tax rate to arrive at their tax liability.
Businesses have to pay excise taxes on a variety of products and services such as fuel, alcohol and cigarettes. These are charged at the time of sale and collected by the seller who remits it to the government. Excise taxes are generally applied on a per-unit basis, unlike general sales taxes, which are typically charged as a percentage of the price of a product or service.
Some economists have defined three primary objectives for taxation, namely resource allocation, redistribution and economic stability. Taxes can be viewed as being able to achieve these goals, although some economists argue that they interfere with market-determined allocations of resources and erode economic growth or development. Others, however, view the role of taxes as being to improve social welfare, particularly for the poor.
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