Types of Taxes

• To enumerate every existing tax in the United States in 2011 would take so long that some of those taxes would no doubt expire before the list ended. Major taxes include income taxes for businesses and individuals, property tax, business tax, corporate tax, payroll tax, estate transfer tax or inheritance tax, banking corporation tax, Social Security tax and Medicare tax.
  
  States and cities levy a number of specific taxes. New York City, for instance, imposes cigarette, alcohol, commercial rent, horse racing, hotel room occupancy, real property transfer, taxicab license, utility and liquor license taxes. States and cities impose sales taxes on all nonessential items.
  
  

Purpose of Taxes

• Taxes exist primarily to generate federal and state funding. Individual and corporate income taxes provide the operational budget of the federal and state governments each year. Thus, everything the government spends money on is paid for with taxes. Taxes on things such as horse racing, alcohol and cigarettes generate extra revenue for the government. Steep cigarette taxes discourage publicly undesirable behavior, smoking. Social Security and Medicare taxes pay for the programs they are named for. The Internal Revenue Service (IRS) monitors tax activity each year, and collects tax return information and payments.
  
  

Where Taxes Go in the United States

• Where the U.S. budget goes, tax revenue goes. In 2010, 20 percent of the federal budget went toward defense funding or international security spending. This accounted for $715 billion in revenue. Another 20 percent of the budget paid for Social Security for retired and disabled Americans, while 21 percent paid for the Medicare, Medicaid and Children's Health Insurance Program (CHIP) medical insurance programs. Other government departments usurping large portions of the federal budget include the Department of Treasury, the Department of Agriculture and the Department of Education. Income tax revenue pays the salaries of public officials such as teachers, public defenders, police officers and firefighters. The bulk of income tax revenue goes to general state funds, though also pay for things like welfare, transportation and public safety.
  
  

The Tax Debate

• Federal and state tax rates fluctuate regularly in the United States, on account of the great tax debate wagging between opposing factions of the federal government. This debate generally falls on party lines, with Republicans arguing for lower tax levels and Democrats arguing for higher tax levels. Those who argue for lower taxes believe that by allowing individuals to keep more disposable income, that money will be reinvested in the economy, resulting in growth. This growth ostensibly results in more jobs and thereby more growth. Those who argue for higher taxes argue that the federal government requires a large budget to insure all constituents of that government receive proper social services.