Types of Taxes in Terms of Tax Equity

Subject: Finance
Pages: 2
Words: 314
Reading time:
2 min

The primary goal for taxation is ensuring that there is the transfer of resources from one group to another while considering existing economic goals. In addition, taxation shifts purchase power among economic classes in a region; it may shift purchasing power from the private sector to the public sector.

In the United States, income tax is imposed by federal law on all states. Income tax is arrived at by determining tax rates. The tax rates are not static; they increase with income. Taxes are applicable to all individuals, estates, corporate, and companies. In the United States, partnership programs are not taxable; tax applies only to independent partners. Tax equity policy intends to ensure equal treatment of taxpayers and make the process fairer. Horizontal equity is such a policy that treats taxpayers with equal ability to pay. Income tax in the United States follows a progressive aspect of vertical equity that burdens taxpayers according to their ability to pay.

On the other hand, tax on goods and services in the United States is imposed on all goods and services that are purchased within the United States or are imported into the United States. Tax equity in taxation follows a horizontal policy; in such a way that all individuals are taxed equally. Only a few goods receive tax waivers, depending on how critical they are, especially for cereals and groceries. Other tax variances that apply to goods imported depend on the importer. If a company is investing in the United States or Canada, it can claim some tax credits.

In the United States, tax equity helps the government seal all loopholes for tax evasion. Tax equity cushions the government budget from financial regression and, at the same time, ensures that there is a fair transmission of purchase powers among all citizens without oppression.