Tax Policy
Definition
A tax policy refers to the government's approach to taxation, both from the practical and normative side of tax law. It includes how taxes are collected, what they're used for, and who pays them.
Analogy
Think of a tax policy like a school's rules on lunch money. Some students (citizens) might have to pay more for their lunch (taxes), while others get free or reduced-price meals based on their family's income (progressive taxation). The money collected is then used to fund various school activities and resources (public services).
Related terms
Progressive Taxation: This is a type of tax system where those who earn more income pay a higher percentage in taxes. It's like charging more for concert tickets from people sitting in VIP seats compared to those in regular seats.
Regressive Taxation: This is when lower-income individuals are taxed at higher rates than wealthier individuals. Imagine if everyone had to pay the same amount for a concert ticket, regardless of their income - it would take up a larger portion of a low-income person’s budget.
Tax Evasion: This refers to illegal practices by which individuals or corporations avoid paying taxes. It's like sneaking into the concert without buying a ticket.
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