As the name suggests, direct taxes are those levied directly on the taxpayer – income tax, wealth tax, corporation tax, etc. In other words, it is a type of tax where the effect falls under the same category.
A direct tax is a tax on the property or income of the person who pays it, not on goods or services. American taxpayers pay a variety of direct taxes, such as income tax, in addition to indirect taxes, such as sales tax. Since they are valued in proportion to the taxpayer’s income or property value, direct taxes offer a degree of fairness in the economy when those taxes are paid in exchange for social services.
It makes direct taxes one of the best ways for governments to distribute social services to low-income people. The wealthy end up paying a higher percentage of taxes, either on the income they earn or through ownership of their most valuable property, and people with low incomes are not obligated to pay taxes at all or recover tax payments in the form of credit.
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