6 Common Types of Taxes

In the United States, taxation is complex and occurs at multiple levels (federal, state, and local). The six main types of taxation are:

1. Income Tax
   • Federal: Imposed by the IRS on individuals and businesses based on earnings.
   • State: Most states have their own income taxes, though some (like Texas and Florida) do not.
   • Local: Some cities and counties also impose income taxes.
2. Payroll Tax
   • Used to fund Social Security and Medicare.
   • Shared by employees and employers, automatically withheld from paychecks.
3. Corporate Tax
   • Levied on the profits of corporations.
   • Applied at both federal and, in many cases, state levels.
4. Sales Tax
   • Imposed on the sale of goods and services.
   • Rates and rules vary by state and sometimes locality.
5. Property Tax
   • Levied by local governments (counties, cities, school districts) based on the value of real estate.
   • Primary source of funding for local services like schools and emergency services.
6. Excise Tax
   • Applied to specific goods (e.g., gasoline, alcohol, tobacco).
   • Can be federal or state and is often included in the price of the product.

These taxes support government functions at all levels, including infrastructure, education, healthcare, defense, and social services.