Taxes are mandatory payments made by individuals and corporations under a government. These payments go to the government to help with government activity. There are many different types of taxes that go to different sectors of the government.
Any time a monetary exchange takes place (like when someone gets paid or buys something), you will be taxed on that money. That money then goes to the government.
Federal taxes are collected by the federal government and then used by the federal government for their bills. State taxes do the same thing just purely at the state level. The state taxes are used to provide state programs.
In Texas we have a sales tax. It is 6.25% on all retail sales, lease, and rentals of most goods, as well as all other taxable services.
Here in Texas, local taxing can also occur, meaning that counties, districts, and transit authorities can impose up to a 2% sales tax. They cannot, however, exceed 8.25% as that is the set federal sales tax rate.
Income tax changes depending on the state, so not every state has income tax, and even those who do, they do not always share the same system.
Different systems include:
- Flat-rate income tax system- this means that all income levels are taxes at the same rate.
- Even when they have this many states have different rates.
- This is only used by nine states.
- The progressive income tax system- this means that if a taxpayer’s annual income increases into a different income bracket, so will their tax rates.
- In these 35 states the rate changes.
- Also because this system is more prorgessive they change it to follow inflation and can be easily changed.