What is an income tax?

An income tax is defined as a tax based on income imposed on individuals or corporations. This form of taxation is typically assessed on the earnings of a taxpayer, which can include wages, salaries, profits from businesses, interest, rents, and other forms of income. Income taxes are a fundamental source of revenue for governments, allowing them to fund public services such as education, infrastructure, and social programs.

The nature of income tax enables governments to adjust rates based on various factors, such as income levels, which can create a progressive tax system where higher earners pay a larger percentage of their income than lower earners. This structure is often designed to achieve social equity and redistribute wealth within a society.

In contrast, property taxes focus on the value of owned property, local government taxes are not limited to a specific level of government, and voluntary contributions do not represent mandatory taxation, as they rely on the choice of the citizen rather than an imposed obligation.