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Taxation is how governments obtain money in order to provide services required for the common good.

There are many kinds of taxes, just as there are many things that are (or are not) considered to be in the common good.

Taxes can include:

  • Payroll taxes are the state and federal taxes that employers must withhold and/or to pay on behalf of employees. Employers withhold state and federal income taxes as well as social security and Medicare taxes from the employees' wages. Employers are also required to pay a matching amount of social security and Medicare taxes for each employee and to pay state and federal unemployment tax
  • Tariffs on imported goods
  • Property taxes on the value of one's real estate holdings
  • Sales taxes on purchases of goods
    • (The preceding three are examples of ad valorem taxes), based as a percentage of value
  • Income taxes on money that is earned
  • Estate taxes on inheritances
  • Poll taxes required in order to vote; they are voluntary
  • Rooms and meals taxes, charged by local government on restaurant and hotel purchases
  • "Sin taxes" which are applied to socially disapproved products such as tobacco and alcohol
  • Pigovian taxes are applied to correct negative externalities
  • Tolls are fees paid by users of a specific piece of infrastructure, like a tollroad or toll bridge
  • Value added tax is charged to manufacturers on the increase in value from raw materials to finished product (and of course passed along to consumers of the product); it is common in Europe and not used in the U.S.
  • Excise tax is a special tax on the production or sale of some specific good or commodity. It is an inland tax, rather than a Tariff. The US federal government was run on excise taxes from various forms of alcohol until prohibition.

Most systems of taxation not only use a combination of several of these, but have many exceptions (and loopholes) from universal application - for instance, a sales tax might not apply to food or clothing.

Rates of taxation and the provision of some services can be matters of great political contention, with Tax revolts common throughout world history.

In the United States, the Democratic party generally favors higher income taxes to pay for government social programs, whereas the Republican Party generally favors smaller government and lower taxes.

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