Taxes: in Simple Words

Our United States government requires funds to operate and manage several different activities, like medical care and education. Much of those funds are collected through taxes, payments collected from individuals or corporations to fund aforementioned activity on local, regional, or federal levels. There are many forms of taxes, and understanding each form will help navigate financial situations.

INCOME TAX

This tax follows a progressive income tax system, meaning that individuals or corporations with higher incomes will pay more than those who make less income. Marginal income tax rates apply, meaning that a percentage of every dollar you earn will be put towards tax payments.

Many variables can influence the amount of income tax paid, like your filing status (ex. filing married jointly).

PAYROLL TAX

Payroll taxes are held from paychecks by employers and paid to the government. The payroll tax applies to both employees and employers. The money is directed towards funding Social Security and Medicare programs.

CORPORATE TAX

This tax is paid from company income at a flat rate of 21%.

SALES TAX

When checking out at a store, a sales tax is paid. Every state, city, and county has different sales tax rates.

PROPERTY TAX

This tax is paid on owned property by individuals or other legal entities, like corporations. Property tax can apply to things like vehicles.

Works Cited

Gorton, David. “Taxes Definition: Types, Who Pays, and Why.” Investopedia, Investopedia, www.investopedia.com/terms/t/taxes.asp#toc-types-of-taxes.Accessed 28 Aug. 2023.

“What Is a Marginal Tax Rate?” Tax Foundation, 31 July 2023, taxfoundation.org/taxedu/glossary/marginal-tax-rate/#:~:text=The%20marginal%20tax%20rate%20is,would%20be%20taken%20as%20tax.