Income tax is the 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
2. Corporation income tax, levied on profits (net earnings) of incorporated firms.

Copy link to clipboard