The primary sources of government revenue are income, sales, and property taxes.
There is an increasing interest in taxes on energy consumption.
The mainstay of local taxation is the tax on real estate, known as the property tax. It is used to fund an array of critical state and local services, most notably public schools.
There are two main ways for governments to collect taxes. One is by taxing income directly. This is known as an income tax. The other is taxing only income that is spent.
Currently, some types of income are either taxed at lower rates than ordinary income or are exempt from taxation to some degree.
In general, only cash income is subject to income tax. In-kind benefits—benefits that are received as goods or services rather than as cash—are not.
Tax credits and deductions are two ways to reduce tax liability. Tax credits directly reduce the amount of taxes owed, dollar-for-dollar. They benefit all those who owe tax.
The federal estate tax was enacted in 1916 to raise revenues. Its intent was also to reduce the concentration of wealth, thus increasing economic equality.
State and local governments issue bonds to finance important projects that meet social goals and benefit communities. Bonds are attractive because they provide financial flexibility.
Most states and localities generate a significant portion of state and local revenue from the taxation of retail sales. Such taxes are attractive because they are relatively easy to administer.