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Lesson 1: An Introduction to Tax
What Qualifies as a Tax?
Taxes are the price we pay for civilized society.
The three main characteristics that all taxes share is that they are mandatory, imposed by the government, and not directly linked to a specific taxpayer benefit.
Mandatory
These are required by law and are not voluntarily paid.
Imposed by the Government
Governments (federal, state, and local) impose taxes to raise revenue for operations and programs that they provide.
Independent of Taxpayer Benefits
Taxes paid by the taxpayer have no direct link to any particular benefit received by the taxpayer. For example, taxpayers will receive the benefits of national defense by our federal government regardless of their payment of taxes. Table 1.1 shows examples of tax programs by governmental level.
| Governmental Level | Programs Taxes Pay For |
|---|---|
| Federal |
National defense Judicial system Social programs
Interstate highways |
| State |
Law enforcement Public schools Low-income assistance Unemployment Environmental programs Road maintenance |
| Local |
Police and fire departments Education Libraries Special projects |