Tax

View FREE Lessons!

Definition of a Tax:

A tax is a payment mandated by the government to be paid by individuals, households, and businesses to finance government operations.

Detailed Explanation:

Taxes provide governments with the vast majority of the income needed to provide public services. There are many types of taxes. Personal and corporate income taxes are levied directly on a family or corporation. In most countries income taxes are progressive, meaning those families or corporations with a higher income have a higher tax rate. Sales taxes are collected by the seller when a good is sold. The amount is a percentage of the purchase price. This is a regressive tax because the sales tax comprises a larger percentage of their income than wealthier consumers. While wealthier consumers may spend more in a year, they also invest, so less of their income on a percentage basis is spent as a sales tax. The property tax is assessed based on the value of an asset owned by the tax payer. Other common taxes include: excise taxes, estate taxes, tariffs, value added taxes, capital gains taxes, and payroll taxes such as Social Security and medicare. Economists study how a tax affects the economy. Does one tax discourage investment more than another? Does a tax burden lower income families more than wealthy families? 

Dig Deeper With These Free Lessons:

Circular Flow Model - We Depend on Each Other
Changes in Supply - The Producer's Perspective
Economic Systems
Marginal Analysis - How Decisions are Made
Supply and Demand - The Costs and Benefits of Restricting Supply
Supply and Demand - Who Pays an Excise Tax

Search the Glossary


Market Overview:

Market quotes are powered by TradingView.com

Single Quote:

© 2018 Higher Rock Education and Learning, Inc. All rights reserved. No portion of this site may be copied or distributed by any means, including electronic distribution without the express written consent of Higher Rock Education and Learning, Inc.