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B Goodness
taxable goods and services
Tax Bases
In designing tax systems, governments
customarily consider three basic indicators of taxpayer wealth or ability
to pay: what people own, what they spend, and what they earn. Historically,
agriculture, as the oldest industry, became the earliest lucrative tax
base. Thus, among major revenue sources taken into consideration, the property
tax on land and its produce is the oldest of modern taxes.
Movable property was somewhat harder
to tap as a resource, but as marketplaces developed, taxes on the sale
or transfer of goods became productive sources of revenue. International
commerce gave rise to import duties, levied both to yield revenue and to
control the amount and kind of imported merchandise. Domestic trade spawned
a variety of taxes, ranging from excises on specific commodities (such
as the ancient salt tax) to levies aimed at taxing designated transactions.
An example of the latter, still widely used in some parts of the world,
is the stamp tax on bills of sale and other legal and financial documents.
(The stamp tax levied by the British government on American colonists became
so prominent as a symbol of tyranny-of "taxation without representation"-that
it helped trigger the American Revolution.) Also widely used today are
excises of many kinds, especially on luxury items and on products such
as liquor and cigarettes, the use of which governments wish to regulate.
Most states in the U.S. levy sales taxes at the retail level. To lighten
the burden of taxation on the poor, states exempt necessities such as food
and prescription drugs or refund taxes paid on necessities to low-income
taxpayers. The Common Market countries (see EUROPEAN UNION) and some other
European countries use a value-added tax, levied on a commodity, at each
stage of production, on the value added at that stage.
Although the value-added tax is comparatively
new, taxes on what people own, buy, transfer, or use have a far longer
history than do taxes on what people earn or otherwise receive in income.
A personal income tax was first used in Great Britain in 1799. It was dropped
for a time and then revived, and has been in continuous use in Britain
since 1842. Because an individual income tax is complex and difficult to
administer, this kind of tax was slow to take hold. By the end of the 19th
century, however, a number of countries in Europe and elsewhere had adopted
it. In the U.S., the 16th Amendment to the Constitution (ratified in 1913)
was needed to establish the legality of a federally imposed income tax.
See INCOME TAX.
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