Free Sample Essays > Accounting
Tax Policy And Local Economic Development
Sales taxes or Property taxes as local economic incentives.
Tax is a mandatory payment by people and businesses to a government of their country. One great thinker noted that “taxes are the payment by citizen for being a part of a civilized society” and that means that everyone in the society needs to pay them. In order to better understand how the local taxation can be used to promote local economic development in the US society it is necessary to briefly note on the taxation system in the country. In the following essay I will explore taxation in a greater detail, focus on local taxes, their use and importance for the local governments and their development projects proposed for the US states.
It is of importance to note that taxes in the society are spent on the following government functions:
· National defense.
· Law enforcement, freedom, and public order.
· Protection of human rights.
· Country’s infrastructure and local services (911, healthcare, police)
· Government operation and effective functioning.
· Educational system in the society.
· Healthcare, pension, unemployment systems.
· Energy, waste and public transportation systems (Barker, 133).
The United States taxation involves regular payments to 4 major levels of the US government:
1. local government (including municipal, town, district, county). This government is financed by property taxes (permits, fees, parcel taxes, fines, income tax, gross payroll, sales tax, etc).
2. Regional entity (schools, utility districts)
3. State governments
4. Federal governments
The state thus also creates special assessment districts (to cover sewage, garbage, public transport etc) that are financed from income obtained through property taxes, tolls, parcel taxes etc. The state government gets finances from sales and income taxes, let alone registration fees paid by corporations, excise taxes, and auto license fees (Pearson, 112).
The US federal government gets the major portion of its revenue from personal and corporate income taxes let alone tariffs placed on imported goods, excise taxes, and social security income taxes.
The Medicare taxes, a medical system similar to social security system. The payments are made by employers or self-employed individuals. These taxes are also mandatory and expect to benefit individuals in old age.
Taxation be it local or federal can be of either of the two forms: progressive and regressive. Flat taxation means that percentage of tax does not depend on the base and thus is proportional to what one earns or spends. Regressive taxation means that the more one has the less tax he/she has to pay. Progressive taxation means that the more one has the higher the tax rate is. It appears that only progressive taxation is fair since it does not place with small incomes at a disadvantage and takes a small percentage of their incomes.
Taxation can be either direct or indirect. For instance, direct taxation happens when taxes are paid by people and organization according to the rules/regulations by the taxing authority. Income taxes are paid by all those who earn income. Indirect taxation on the other hand means that tax is created by someone else besides the person who is responsible for paying them. For instance, the price of gas, alcohol or cigarettes already comprises a certain tax which [next page]