Tax is any mandatory payment or charge imposed by a government on people and businesses for the purpose of funding public goods and services, like national defense, streetlights, and welfare programs. Most taxes are collected as a percentage of a monetary exchange (such as income tax, sales tax, or tariffs) while others are assessed on the value of property held by an individual, such as real estate taxes. Individuals and business owners can have a variety of complex tax situations, especially those who have multiple sources of income or file using different forms, such as W-2, 1040A, or 1040EZ. Having an understanding of how these factors affect one’s tax situation can help them anticipate their annual tax liability and maximize deductions and credits.
While a tax may be levied in order to collect revenue, the primary objective of most taxes is not to raise money but rather to influence behavior. This is what distinguishes them from fees, which are usually designed to offset the cost of a particular service, such as a fee paid for entering a state park that covers staffing and maintenance costs. There are also a variety of tax-like measures, such as excises, which can be used to modify consumption patterns in a particular area, for example, by discouraging alcohol consumption via high excise taxes. This is often referred to as social engineering or behavioral modification. The exact methods of tax collection vary by country, but most systems are either progressive or regressive.