Taxation is the method by which governments finance their spending by levying charges on their citizens and business entities in order to generate revenue. In economics, taxes are divided between buyers and sellers and the tax burden falls on the group that has to pay for the tax. In modern countries, taxation is involuntary and failure to pay different taxes can result in imprisonment. Government often use taxation to encourage or discourage certain economic decisions.Continue Reading
Tax burden is related to price elasticity of supply and demand, and elasticity refers to how demand and supply of products responds to price or income changes. If supply is more elastic than demand then the tax burden falls on the buyers, and if demand is more elastic than supply then producers bear the cost. In the United States, the Internal Revenue Service is in charge of ensuring that citizens and corporations pay their taxes.
Different types of taxes are income tax, sales tax, property tax and tariffs. Income taxes are taxes on a percentage of a person or corporation's earnings. A sales tax is a tax that the government imposes on certain good and services. Property tax is a tax levied on land and property assets. Tariffs are taxes on imported goods and high tariffs often signify a country's aim to strengthen domestic businesses.Learn more about Economics