Review of Taxes: Definition, History and Different Kinds

The government uses the money it gets from taxes to pay for things. For example, taxes are used to pay for people who work for the government, such as the military and police, provide services such as education and health care, and to maintain or build things like roads, bridges and sewers.

Most countries have a tax system in place to pay for public/common/agreed national needs and government functions: some levy a flat percentage rate of taxation on personal annual income, some on a scale based on annual income amounts, and some countries impose almost no taxation at all, or a very low tax rate for a certain area of taxation. Some countries charge a tax both on corporate income and dividends; this is often referred to as double taxation as the individual shareholder(s) receiving this payment from the company will also be levied some tax on that personal income.

There are many different kinds of taxes.

• Taxes that are based on how much money a company earns are called corporate taxes
• Taxes that are based on how much money a person earns are called income taxes.
• Taxes that are based on how much a person buys are called sales taxes.
• Taxes that are based on how much a person owns are called a property taxes. Things like houses have a property tax on them.
• Taxes that are paid when official document are approved are called stamp duties (because in the past the document would have a stamp put on it). Changing who owns a house will often need a document approving.
• Taxes that are paid when somebody dies are called inheritance or estate taxes.

Taxes are also usually split into 3 groups

• Flat taxes: Everybody pays the same percentage. Russia has a flat income tax and everybody in Russia has to pay 13% of the income.
• Progressive taxes: The more money a person makes, the higher percentage of their income they have to pay. Most countries have progressive income taxes.
• Regressive taxes: The less money a person makes, the higher percentage of their income they have to pay. Sales taxes are usually called regressive as poor people spend a higher percentage of their money, than rich people.

Often because different parts of governments use taxes for different things, people end up paying lots of taxes.

In the United States, for example, the national government has an income tax; most states have an income tax or a sales tax, or both; and cities and towns may have a sales tax or a property tax. In some states such as Ohio, the sales tax is different in each county.

In ancient times, people from one city or area would attack another place, and make the people there pay tribute. Tribute meant that the attacked people would pay money (or other things), and the attacker would stop attacking them. A famous tribute was the Danegeld when people from Denmark conquered part of England and made the English pay thousands of silver coins.