FOR LAWYERS

Tax Revenue

By
Lia Kopin-Green
/
May 15, 2023

What is Tax Revenue?

In United States tax law, tax revenue is defined as the amount of money that the government collects from individuals, businesses, corporations and other entities in the form of taxes. These funds are typically used to finance essential public services such as education, healthcare, infrastructure and defense. The Internal Revenue Service (IRS) of the United States is responsible for enforcing US tax laws and collecting tax revenue.

Key Takeaways

  • Tax revenue is the amount of money that the government collects from individuals, businesses and other entities in the form of taxes.
  • The revenue is used to fund various public services such as education and healthcare.
  • Tax revenue is collected by the federal, state, and local governments in the United States.

Sources of Tax Revenue

Tax revenue is generated through a variety of sources including:

  • Income Taxes: Income taxes are a significant source of tax revenue for governments. Generally, they are imposed on individuals and businesses based on their income or profits. Income taxes may be imposed on both a federal and state level. In the United States, Income tax rates are progressive, which means that higher income earners are typically subject to higher tax rates.
  • Property Taxes: Property taxes are taxes levied on the value of real estate and other types of property. In most cases, property taxes are collected by local governments, such as counties or municipalities and are typically based on the assessed value of the property. Exact property tax rates can vary depending on the location and type of property.
  • Social Security and Medicare Taxes: Social Security and Medicare taxes, which are considered payroll taxes, generate plenty of tax revenue for the United States. The funds collected through Social Security payroll taxes are used to provide retirement benefits, disability benefits, and survivor benefits to eligible individuals. The revenue generated from Medicare taxes is used to fund the Medicare program, which provides healthcare coverage to individuals aged 65 and older, and individuals with certain disabilities.
  • Sales and Use Taxes: Sales and use taxes are added to the costs of goods and services and are collected by sellers and service providers. They must be paid directly to the federal, state, or municipal authority that is enforcing the tax. In the United States, sales and use taxes have a regressive nature. This means that they tend to impose a higher burden on low-income individuals.

Bottom Line

To summarize, tax revenue can be seen as the fuel used to power important government public programs and services. Understanding the various tax revenue sources, such as income taxes, payroll taxes, sales taxes, and property taxes, can provide critical insight into how the US tax system operates.

If you are seeking legal support regarding all things taxes, please contact one of our skilled tax lawyers today. We are here to help you seamlessly navigate this year’s tax season.

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