Tax System: Aspects of the Payroll Tax

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Table of Contents

Introduction
Discussion
Conclusion
Reference

Introduction

Taxation is one of the main instruments of the US financial policy and its main goal is to increase revenues. Taxation includes many different components such as income tax, corporate tax, property tax, etc. One of the most important types of taxation in the US is the payroll tax. With payroll tax, a tax payer is credited with a tax on each earned unit of money or other income. However, the payroll tax allows deductions for charitable donations and contributions to pension plans. I would like to discuss the deductions allowed for payroll tax in the US. After all, if the main goal of the tax system is to increase revenues, why are these deductions allowed – an interesting question.

Discussion

Charity is of indeed significant importance to the United States. Tax deductions can motivate people to make charitable donations, supporting organizations that continue to help others. This can lead to an increase in revenue for two reasons. The first is the return on charity support; second, charity can lead to an improvement in public welfare, increasing productivity and reducing expenditure on helping the poor (Jensen, 2022). Moreover, contributions to pension plans can lead to an increase in revenues in the long run. Subsidies to pension plans help to support people in their old age, which leads to a reduction in expenditure on helping the poor and an increase in productivity of society (Jensen, 2022). In the long run, this can lead to an increase in revenues. In general, the admission of deductions for charitable donations and contributions to pension plans can lead to revenues in the long run. This charity and social insurance can help overcome the difficulties that people may experience in the future.

Conclusion

Overall, payroll tax allows deductions for charitable subsidies and contributions to pension plans to support the financial activity of the population and help people prepare for retirement. These taxation tools provide taxpayers with additional motivation for investment and help increase revenues that ultimately benefit the population.

Reference

Jensen, A. A. (2022). Employment Structure and the Rise of the Modern Tax System. The American Economic Review, 112(1), 213–234. Web.

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Tax System: Aspects of the Payroll Tax

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