Types of Taxes

There are many things people can avoid in life. Responsibilities, other people, knowledge, skills, the list goes on. However, as the old adage goes, the only two things that we as humans cannot outrun are death and taxes. And if you are a working adult or on the cusp of becoming one, then you need to familiarize yourself with the concept of taxes.

If you happen to be among these people, this article is for you! Here, we will take you through the three main types of taxes you need to know about. After all, taxes are an essential part of an individual’s financial literacy, and being informed about them opens doors to using financial services more effectively.

Taxes on What You Earn

You must have heard of Income Tax. Generally speaking, almost all the taxes in this category, like payroll taxes and capital gains taxes, are applicable on income of all kinds. Whether it be an individual or a group, they have to pay income taxes proportional to what they are earning.

And because they are calculated as proportional to the amount of earning, these taxes are, for the most part, progressive ones. This means that when your income increases, so does the amount of tax you have to pay.

Taxes on What You Buy

These charges are referred to as consumption taxes and are levied in order to raise money for every single step of production and also serve as revenue for the local services. These taxes are there on every single commodity, whether it be goods or services.

You pay some tax on everything you buy. Sales taxes and Value Added Taxes (VAT) are common examples of this occurrence. Another example is an excise tax, which you have to cover for specific goods. These could be fuel, tobacco, and alcohol.

Taxes on What You Own

These taxes are charged based on the property you own and your gross wealth. Your estate, inheritance, land, house, tangible assets like machinery, etc., are all taxable under this category and are all related to the cost of living. They are meant to reach those who are not as privileged, as well as to cover state expenses. If the individuals don’t fulfill the obligation to pay such taxes, the government reserves the right to take their property away.

Conclusion

There are many kinds of taxes that apply to various types of income and property. Understanding the intricacies of how they work and what makes them tick will help you navigate the twists and turns of this road. Besides, if you have any debts accumulated from your previous tax payments, feel free to resolve this issue with Payday Depot and use our tips to avoid getting into financial trouble in the future.