Taxes

Taxes are charges enforced by government-bodies on income, property, products and activity. There are two types of taxes, a direct tax and an indirect tax. The direct tax is generally paid by an individual or entity directly to the government. An indirect tax is generally paid to an intermediary by an individual or entity. The intermediary then distributes those funds to the government.

Fast Facts

1. Examples of direct taxes: Property tax, income tax and capital gains tax
2. Examples of indirect taxes: Sales tax, goods and services tax
3. Taxes fund government spending
4. Public goods, such as public-roads, public-parks, schools and hospitals are funded by taxes
5. Taxes can be used to allocate money from the rich to the poor
6. Taxes can be used to dissuade activity, examples of such taxes are the pollution tax and the tax on cigarettes

2007 U.S. Federal Tax Bracket¹

• $0 - $7,825: 10%

• $7,825 - $31,850: $782.50 plus a 15% charge on income over $7,825

• $31,850 - $77,100: 4,386.25 plus a 25% charge on income over $31,850

• $77,100 - $160,850: $15,698.75 plus a 28% charge on income over $77,100

• $160,850 - $349,700: $39,148.75 plus a 33% charge on income over $160,850

• $349,700 - no limit: $101,469.25 plus a 35% charge on income over $349,700

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