Wealthy Tax Secrets

They say that the only two things we can be absolutely certain of in life are death and taxes. But why DO we pay taxes? There had to be a point in time when people didn’t pay taxes, right?

In order to answer this, we need to look into the history of government and society. In the beginning of human history, people lived in nomadic tribes where one person and/or his family would preside over the tribe. Everyone basically worked for the good of the tribe. At some point these tribes began to settle down and villages began to form.

It was during this time that something akin to “government” probably took hold. Throughout history there have been, and continue to be, different forms of government from dictators to monarchies to republics to democracies. Each form of government would tax its citizens for a variety of reasons.

Some governments may have taxed their citizens for the benefit of a few (the wealthy) or even for the common good. For example, the Roman Empire did not tax you if you were a Roman citizen AND lived within the city limits of Rome. Instead the Roman Empire taxed all of its conquered peoples in exchange for peace (Pax Romana) and other services (roads).

This concept of paying taxes for services has evolved quite a bit since the Roman Empire. We now have a smorgasbord of different taxes and pay for different services in our modern life. Different types of taxes include:

• Real estate taxes – are imposed by local government in order to pay for schools, police/fire services, hospitals, garbage disposal, sewage/sanitation, road maintenance, parks, and libraries.
• Sales taxes – can be imposed at any level of government, but the largest percentage is at the state level. The funds from sales taxes go towards the State’s budget and will vary from state to state. Income tax – is imposed at the federal level as well as the state level (with some exceptions).
• Income tax is a progressive tax in the United States. This means that the tax rate increases as the amount subject to taxation increases. The proceeds from income tax are used for the Federal budget.

There are of course other types of taxes such as the Payroll (FICA), Capital Gains, Corporate, Estate, Gift, and Excise taxes. These taxes are used for the government’s budget, with the exception of the Payroll Tax which goes to fund Social Security and Medicare.

Ideally the proceeds from taxes would benefit all equally. However, this is not always the case as people pay taxes, which pay for government services that they may not use or agree with. For example a bachelor pays property tax for the local public’s school budget even though he has no children. Another example is people who disagree with the Federal government’s policy, but are required to pay taxes to fund the Administration’s policy nonetheless.

Some people refuse to pay their taxes, either for one of these reasons or other reasons. These people are known as tax protesters (people who willingly fail to pay their taxes) and are discussed in another article.