Taxes are a common duty of taxpayers and aren't paid in exchange for any precise benefit. They have existed since antique times. The main three functions of taxes are to endorse steady economic growth, to cover government expenditure, and to reduce dissimilarities in the distribution of income and wealth. They are also used to promote or discourage some activities, for example to reduce cigarette consumption. There are mainly two types of taxes direct taxes and indirect taxes. Direct taxes are taxes on persons which are based on the ability of an individual to pay and are calculated on the basis of their income or net wealth.
Examples for direct taxes are taxes on net worth, income taxes, death duties, and gift taxes. Indirect taxes are taxes which are not charged on and collected from those who are intended to accept it. These taxes will not take individual consider circumstances. Examples for indirect taxes include excise taxes, sales taxes, and value-added taxes. Taxes can also be categorized based on their effect on the distribution of wealth. This classification includes proportional taxes, progressive taxes and regressive taxes. A proportional tax is one in which the burden of tax imposes equally on all taxpayers, unlike progressive taxes and regressive taxes. In a progressive tax the rate of tax will increases as your earning increases. That means individuals who earn more incomes have to pay greater proportion of their incomes as the tax. In a regressive tax the rate of tax will be high if your earning is less. Sales tax is often called as regressive taxes so as to make them compare feebly with income tax in terms of their fairness. Sales tax is tied to consumption rather than income. So that individuals and families having low-income should pay a greater proportion of their incomes as sales taxes. So we can say that sales tax is regressive which is unfair.
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