income tax

  

Definition

Annual charge levied on both earned income (wages, salaries, commission) and unearned income (dividends, interest, rents). In addition to financing a government's operations, progressive income taxation is designed to distribute wealth more evenly in a population, and to serve as automatic fiscal stabilizer to cushion the effects of economic cycles. Its two basic types are (1) Personal income tax, levied on incomes of individuals, households, partnerships, and sole-proprietorships; and (2) Corporation income tax, levied on profits (net earnings) of incorporated firms. However, presence of tax loopholes (whose number increases in direct proportion to the complexity of tax code) may allow some wealthy persons to escape higher taxes without violating the letter of the tax laws.

Use income tax in a sentence

  • Because Florida does not levy income tax, it relies on revenue generated from sales and property tax to fund the state.

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  • The man's income tax was getting higher as he moved up in the company and he started to make more money, he knew that climbing the corporate ladder would come with consequences.

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  • Even though no one likes to pay it we all pay the income tax so that the government has money to make our lives better.

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