Policymakers must choose how much to rely on taxing the income people receive versus taxing only the income that they spend (i.e., consumption).
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 the 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.
The federal estate tax was enacted in 1916 in an effort to raise revenues, reduce the concentration of wealth, and increase economic equality by preventing the wealthy from
State and local governments issue bonds to finance important projects to meet social goals. Bonds provide financial flexibility.
How to improve the tax code is the subject of much debate.
Policymakers use the tax system not only to raise revenue but also to promote social policy goals.
Most states and localities impose a tax on retail sales. Such taxes generate a significant portion of state and local revenue.