Taxation

Most modern societies employ some sort of taxation.

But taxes have not always involved money: the ancient Chinese paid their taxes with pressed tea, and Jivaroan tribesmen in Brazil paid with shrunken heads.

Trade soon became a common source of tax revenues, with tolls and customs duties being collected from travelling merchants.

Later, tangible items owned by citizens and subjects like property and land became targets of government tax collectors.

Income tax, the biggest source of revenue in most countries today, is a comparatively recent invention.

In the 20th Century governments were spending increasingly large sums of money on defence and social welfare programs.

To help underwrite these expenditures, income taxes were deployed.

As income taxes have become increasingly unpopular, other forms of taxation have been explored.

Indirect taxes on consumption like the value added tax are now commonly used.

The overall level of taxation varies among countries: the United States tax revenues amount to around 1/3rd of its GDP, whereas in Sweden it is closer to half.

There are some who believe any tax is a “bad” tax, but public goods and government activity need to run on something.


Kevin “KAL” Kallaugher has been the resident cartoonist for The Economist since 1978. KAL Draws is a series of animated shorts which was commissioned by The Economist to illustrate finance-related topics like tax, trade and inflation for their specialized dictionary titled Economics A-Z.

Myles Money

Myles writes about money management, debt control, student loans and financial literacy for teens, 20s and beyond. He is also a regular contributor to RealVision TV, where he discusses economic and money-related issues affecting the millennial generation.

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