What are the three main types of taxes?
The three main types of sales in the US that fund government operations are levied on income, sales, and property. What you need to know.
In the United States, government operations are primarily funded through taxes on income, commerce, and property.
Additionally, taxes levied on corporations are an additional revanue source, but this article will focus on those taxes paid by most people.
Across the country, federal taxes are levied on income. However, a few states do not have an income tax and, in most cases, impose higher taxes on property or commerce (i.e., sales tax).
The rate at which incomes are taxed varies from state to state, with the largest tax bills often coming from California (13.3 percent), Hawaii (11 percent), New Jersey (10.75 percent), Oregon (9.9 percent), and Minnesota (9.85 percent).
At checkout, taxes are also applied to the purchase, with some goods like alcohol, tobacco, and some luxury goods, often associated with higher rates.
Tennessee (9.55 percent) and Washington (9.23 percent) do not tax income but are home to some of the highest sales taxes.
Other taxes with high sales taxes include Louisiana (9.52 percent), Arkansas (9.51 percent), and Alabama (9.22 percent).
On the other end of the spectrum, Turbo Tax also reported that in four states with no sales tax: Oregon, Delaware, Montana, and New Hampshire. However, many states do allow localities to impose sales taxes meaning the amount paid can vary within a state.
When looking at the total that shoppers pay in sales tax, the Tax Foundation found that residents of North Dakota ($5,566), Vermont ($5,318), Hawaii ($5,296), and Connecticut ($5,103) hand over the most.
However, when one accounts for sales and income taxes, residents, Turbo Tax, found that residents of New York (12.7 percent), Connecticut (12.6 percent), New Jersey (12.2 percent), Illinois, California, and Wisconsin (11 percent) pay the highest bill to the state and federal government.
Tax on a property is a significant source of revanue for local governments. These taxes are often used to fund public schools, parks, and public safety.
Even in cases where a mortgage has been paid off, property taxes still must be paid.