The U.S. government’s authority to collect taxes originates directly from the Constitution, specifically Article I, Section 8.
This section grants Congress the power “to lay and collect Taxes, Duties, Imposts and Excises,” ensuring the government has the funds necessary to operate and provide public services.
Let’s look closer at these powers.
The Constitutional Basis for Tax Collection
As seen above, the section allows Congress to “lay and collect taxes, duties, imposts, and excises.” But what do these terms mean?
Below is the breakdown.
1. Lay and Collect Taxes
When the Constitution says Congress can “lay and collect taxes,” it’s simply giving them the go-ahead to create different types of taxes and keep things running smoothly.
Now, taxes aren’t just one kind—they come in a few different forms.
There’s income tax based on what you earn. Then, if you own a home or land, you’re likely familiar with property tax. Sales tax covers what you buy, and excise taxes apply to certain items, like gas, alcohol, and cigarettes.
Each of these types helps raise money in its own way, supporting everything from schools and roads to national defence.
In other words, this part of the Constitution lets Congress draw from these sources when needed. We will expand more on the types of taxes later in the article.
2. Impose Duties, Imposts, and Excises
Next, let’s look at the terms “duties,” “imposts,” and “excises.”
⦿ Duties
First up are duties.
These are taxes that the government charges on goods imported into the country. An excellent example is buying a stylish new pair of shoes that were made overseas. When those shoes arrive at U.S. ports, customs checks for duties.
This tax is added to the price of the shoes, which helps the government collect revenue and protects local manufacturers.
⦿ Imposts
The term “imposts” means taxes on certain goods or services. These taxes can apply to items that come from other countries or those made right here in the U.S.
We can look at it this way:
If a state decides to slap a tax on sugary beverages, that’s an impost. The goal here isn’t just to raise money; it’s also about influencing our choices. The government hopes to encourage people to opt for healthier options by taxing sugary drinks.
It’s a fine balance between generating revenue and promoting public health.
⦿ Excises
Now, we get to excise taxes, which are a bit broader.
These taxes are imposed on the production, sale, or consumption of certain products, often those with a significant social impact. Common examples include taxes on tobacco, alcohol, and fuel.
When you drive up to the gas station, you might not notice that a portion of what you pay for gas includes an excise tax. This tax isn’t just disappearing; it funds roads and transportation projects.
Excise taxes can also help the government influence behavior. For example, when they raise taxes on cigarettes, it’s not just about making money. It’s also about discouraging smoking and promoting healthier choices.
Types of Taxes the Government Collects
We briefly covered the types of taxes, but let’s expand on them a bit for a clearer understanding.
Income Tax
Income tax is perhaps the most familiar one. This federal tax applies to both individuals and corporations, based on what they earn annually.
For individuals, the rate they pay depends on their income level, with higher earners paying a larger percentage. Corporations, meanwhile, are taxed on their profits. So, where does all this go?
The revenue funds essential federal programs and services like infrastructure, defence, and countless other areas that keep the government running smoothly.
Payroll Taxes
Moving on, payroll taxes are a major source of federal funds, directly supporting Social Security and Medicare. These programs provide important assistance to retirees and people with disabilities.
Both employers and employees contribute, with part of employees’ earnings going directly to these programs. Medicare taxes, in particular, help cover healthcare for those over 65, ensuring access to medical care when it’s needed most.
Sales and Excise Taxes
As seen above, excise taxes come into play whenever we buy certain goods and services.
Sales tax is added to the cost of everyday purchases, while excise taxes target specific items, like fuel, alcohol, and tobacco. These excise taxes, sometimes called “sin taxes,” not only bring in revenue but also aim to reduce the consumption of products seen as harmful.
Property and Estate Taxes
Finally, the property and estate taxes. Property tax is something most homeowners deal with, and it often goes toward local services like schools and emergency services.
This tax is based on the value of the property and varies by location.
Then there’s the estate tax, which applies when large estates are passed down from one generation to the next. Only estates above a certain value are taxed, ensuring that substantial wealth contributes to public resources.
Both of these taxes play a role in keeping communities and services well-funded, helping provide essential support for everyone.
Enforcement of Tax Collection
We’ve talked about the types of taxes and why they’re collected, but how does the government actually make sure we all pay? That’s where the IRS, or Internal Revenue Service, steps in.
IRS is the government’s tax manager, overseeing the process and ensuring that everyone follows the rules.
They handle processing tax returns and keeping track of forms like W-2s for your earnings and 1099s for other income. Filing these forms is important to making sure taxes are organized and accurate.
Penalties for Non-Compliance
What happens if you skip a step, like forgetting to file or pay your taxes? This is where the IRS enforces compliance with penalties. If you’re late paying, the IRS charges interest and late fees, which can add up fast.
And if someone continually ignores these obligations, the consequences increase, possibly even leading to legal action.
The Power to Audit
But there’s another side to enforcement beyond penalties—audits.
When the IRS needs to ensure a taxpayer’s return is accurate, they may conduct an audit, which is a close review of your records and claims. Not everyone will face an audit, but having your paperwork in order (like receipts, pay stubs, and W-2s) can make all the difference if you do.
Audits are a final check, giving the IRS a chance to look more closely at tax returns and help ensure fairness for everyone.
Challenges and Controversies Around Tax Collection
While the IRS plays a key role in collecting taxes, the system faces several challenges and controversies. One major topic is tax fairness. People often debate the pros and cons of progressive, flat, and regressive taxes, each with its supporters and critics.
Another point of contention is how the government uses tax revenue. Many argue about whether funds should go more toward social programs or infrastructure.
There’s also the issue of tax evasion and avoidance. Some people and businesses try to find ways to reduce their tax bills. This raises questions about fairness and how well the government can handle these issues.
Balancing these problems is a complex and ongoing conversation in our society.
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FAQs
Here are the most frequently asked questions about what gives the U.S. government the power to collect taxes.
