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What Is Tax Revenue?

By Susan Grindstaff
Updated May 16, 2024
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Tax revenue typically refers to monies collected by governments as the result of taxes imposed on their citizens. Some of the most common types of taxes include those on income, purchases, and real property. Tax revenues are used to finance the government and help maintain public works. These taxes also pay for government-sponsored programs in defense, education, and social welfare. Most all governments have legislation in place that allows them the right of legal taxation of their citizens.

Income tax revenues are collected by taxes that are imposed on various types of income. Income can include earnings from wages, commissions, and royalties. Some governments tax income derived from investments, speculation, and gambling. In the US and many other countries, citizens can sometimes lower the amount of their tax liability by showing allowable deductions to income. Most of the time, any tax revenue that is derived from income is payable to federal and state governments.

Property taxes are typically used to collect tax revenue needed by more localized government bodies, such as states, provinces, counties, and parishes. Property taxes are collected on homes and land, and are commonly paid on a yearly basis. Automobiles are usually taxed yearly as well, and that tax is typically collected by the implementation of laws that require automobile owners to purchase license plates that must be updated each year. Tax revenues collected by local governments are typically used to maintain county and state or provincial roads, schools, and public facilities. They are also used for community needs such as outreach programs for the needy.

Most every day, governments collect tax revenues by the implementation of sales taxes. Sales taxes are levied against most all types of purchases, though in some cases, exceptions are made for some foods and medicines. The amount of the tax sometimes depends on the type of items being purchased, and some purchases qualify for heavier taxes that are reserved for luxury items. Some sales tax revenue is collected by taxing items that the government may wish to discourage the use of. This can be seen in carbon taxes on gasoline, as well as additional taxes placed on tobacco and alcohol.

Tax revenues are crucial to most all forms of government. Without these revenues, most governments would be unable to offer the sound environment that is necessary for their citizens and businesses to prosper. For this reason, in most countries, failure to pay taxes can result in severe penalties. These penalties typically include fines and in some cases can even result in incarceration.

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Discussion Comments

By RoaringKtten — On Mar 29, 2014

I recently read an article regarding how state and local agencies are become more aggressive when it come to collect their tax revenue due to the low collection.

Some of them are hiring outside collection agencies to handle their delinquent accounts. Others are actually closing down businesses that are delinquent until they pay their outstanding balances.

By Loyally89 — On Mar 28, 2014

As a state employee, I have found that many local city and county government agencies also use tax revenue as part of its budget to pay employees.

If the tax revenue come in low for the year, then it may result in budget cuts or layoffs for the following year.

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