3.-Principle-and-Purpose-of-Taxation

Taxation

The process by which the sovereign raises income to defray the necessary expenses of the government.

Sovereignty

The authority of a state to govern itself or another state.

Historical Evolution

The development and changes in the concept and implementation of taxation over time.

Legislative Branch

The part of government responsible for making laws, including laws related to taxation.

Constitutional Limitations on Taxation

Restrictions in the constitution that limit the government’s ability to impose taxes.

Public Purpose

The necessity for taxes to only be imposed for the benefit of the public.

Ability to Pay Principle

The principle that taxes should be proportionate to an individual's ability to pay.

Administrative Feasibility

The capacity of tax laws to be effectively enforced by the relevant authorities.

Inherent Limitations

Natural restrictions on the power to tax that do not require formal laws to exist, such as public purpose and territorial jurisdiction.

Fiscal Adequacy

The principle that total government revenue must be sufficient to cover its expenditures.

Tax Base

The total amount of income, property, or sales that can be taxed.

Progressive Tax

A tax system in which the tax rate increases as the taxable amount increases.

Regressive Tax

A tax system where the tax rate decreases as the amount subject to tax increases.

Proportional Tax

A tax system in which the tax rate is fixed, regardless of the amount subject to tax.

Tax Incentives

Tax benefits provided to encourage certain behaviors or investments.

Tax Evasion

The illegal act of not paying taxes owed to the government.

Tax Avoidance

The legal reduction of tax liability through strategic planning.

Tax Reform

Changes made to the tax system to improve efficiency, fairness, or simplicity.

Assessment

The determination of the value of property for tax purposes.

Exemption

A provision that allows an individual or entity to avoid paying certain taxes.

Deduction

An expense that can be subtracted from income to reduce the amount of taxable income.

Tax Liability

The total amount of tax owed to the government.

Withholding

The amount of an employee's earnings withheld by an employer for tax purposes.

Federal Tax

A tax levied by the national government on income and various transactions.

State Tax

A tax imposed by individual U.S. states on income, sales, and property.

Local Tax

A tax levied by a local government, such as a city or county.

Tax Year

The year for which tax is calculated, typically coinciding with the calendar year.

IRS

The Internal Revenue Service, the U.S. government agency responsible for tax collection and enforcement.

Revenue

The income generated from various sources, such as taxes and fees, to fund government services.

Fiscal Policy

The use of government spending and tax policies to influence economic conditions.