Property, income and estate tax are the most important forms of revenue in the United States for the federal, state and local governments.
April 18 is the upcoming deadline for all federal taxes to be filed to the Internal Revenue Service. Millions of Americans will have to pay income taxes with the agency as well as other state taxes as the year progresses.
Taxation is the key revenue source for the government to stay open and operate as it sponsors the nation's military, education and other public needs.
What is Income tax?
Income tax is one of the most common forms of taxation that every American taxpayer must pay and is one of the most important streams of revenue for the federal government. This form of taxation typically involves the government taking a percentage of the annual income or revenue of an individual or company. Not all individuals or companies are taxed the same amount because it is based proportionally on their revenue.
On top of the federal income tax, individuals must also pay state taxes, which, often times, is another form of taxation based on yearly personal income. Income tax accounts for the vast majority of revenue that the federal government uses to pay for public works such as roads, schools and government offices, accounting for 80% of all federal revenue.
The Internal Revenue Service is the chief agency in charge of collecting and enforcing the tax code. The agency was created by President Lincoln when he first introduced the income tax during the American Civil War to help fund the budget of the Union Army.
What are property taxes?
Property tax is one of the oldest and most typical forms of revenue for state and local governments in the United States. It is based on taxing a property owner based on the overall value of the property, and typically, the taxation comes from the government that holds authority or jurisdiction in the area where the property is located. Moreover, property tax in the U.S. can often come from multiple governing bodies at the state or local level on the same property based on the jurisdiction.
Throughout the last century, property tax has become a less reliable form of revenue for local and state governments due to new measures surrounding sales tax and the emergence of income tax near the time of World War I. For most of American history, local and state governments almost entirely based their annual revenue stream on property taxes, but it still remains an important source for financing for schools and local parks.
What is the estate tax?
The estate tax is often associated with the inheritance an individual or family receives after someone dies and transfers their wealth to an heir or heirs. However, the estate tax in the United States is a form of taxation on an estate, which can include property, items, and overall wealth, at the time of an individual's death as they prepare to transfer it.
This form of taxation has often been controversial because those against the estate tax believe that a deceased individual should not face additional payment on their overall estate.