Direct Vs. Indirect Taxation Research Paper Example | Topics and Well Written Essays - 2000 words

broadcast Vs. Indirect Taxation - Research Paper ExampleIn order to valuate our argument it would be important for us to know the difference between direct and indirect revenueation. Direct taxationes ar those taxes that are levied on ones income. They are calculated annually and a trusted percentage is levied on the earnings of a soulfulness. Similarly, indirect taxes or not levied on the peoples income. Instead, indirect taxes are paid on the purchase of goods and services. They are paid whenever a purchase is made. They are included in the selling price of a good and service and hence a person cannot escape indirect taxes since he is paying not only the price of the good or service, only when also the portion of a tax. Hence it is unavoidable and is paid by everyone irrespective of his earning. (McConnell)We can exercise the above definitions to classify the national income tax and national sales tax into one of the two classes of taxation. This would serve well us in determine which is more useful in terms of revenue for the government and offbeat of the society. Since we know that federal income tax is levied on peoples income and is calculated annually, we can classify it as a direct tax. This room that it is levied on the persons income. It is a progressive tax where the bass person pays a higher(prenominal) amount than a person who is earning lesser than that person. On the other hand, federal sales tax is levied on the purchase of goods and services. People pay this type of tax only when they bargain for or sell something. It is not charged on the persons income and it is a regressive tax meaning.... Hence it is unavoidable and is paid by everyone irrespective of his earning. (McConnell) We can use the above definitions to classify the federal income tax and federal sales tax into one of the two classes of taxation. This would help us in determining which is more useful in terms of revenue for the government and welfare of the society . Since we know that federal income tax is levied on peoples income and is calculated annually, we can classify it as a direct tax. This means that it is levied on the persons income. It is a progressive tax where the fat person pays a higher amount than a person who is earning lesser than that person. On the other hand, federal sales tax is levied on the purchase of goods and services. People pay this type of tax only when they buy or sell something. It is not charged on the persons income and it is a regressive tax meaning that both rich and poor pay equal amount of tax if the selling price of a good is said(prenominal) for their purchases. In other words, we can differentiate between these two types of taxes by using mathematic equation. Income tax is charged on ones income. It is a percentage of ones income. Lets infer that the prevalent income tax rate in the United States of America is 20%. The calculation of taxes for the income will be the following Income Tax = Annual In come * 0.25 Similarly, in case of an indirect tax such as federal sales tax, the calculation for the income tax will be the following Tax = Selling Price of good * Percentage of the Tax These two equations tell us that federal sales tax has nothing to do with the income of a person. It is calculated just by looking at the value of the purchase that the person is