What Is the Purpose of Imposing Taxes?

What Is the Purpose of Imposing Taxes?
••• Image by Flickr.com, courtesy of Kevin Dooley

Everyone knows that taxes pay for the government, but there is much more to it than that. Taxes are used to finance projects, spread income among lower-income citizens and influence the ways people handle their money.

Finance Government

Taxes pay the salary of every government employee, from the President of the United States to the janitor of the local city hall. Taxes also pay for the cost of running the government, including things such as buildings, utilities, research, equipment and supplies.

Finance Government Projects

Whether it is a temporary project, such as a new Interstate, or a long-term program, like food stamps, the taxes collected each year are the primary funding source.


Distribute Income

Some of the taxes that are collected are immediately distributed among lower-income groups through refundable tax credits such as the Earned Income Tax Credit.


Influence Buying Habits

Some taxes serve a second purpose of encouraging or discouraging the purchase of certain items for a variety of reasons.


Influence Saving Habits

Some tax rules are set up to benefit those who invest in certain ways, thus encouraging saving methods that are considered better for the country.