Sources of Revenues

Governments have three main ways to pay for the goods and services that they consume and those that they provide:taxes，borrowing，and printing money.There are limits to all three.For instance，governments cannot print as much money as they want and expect that it will retain its value.Inflation is the inevitable result，which can ruin even the strongest economy.Borrowing money—either from its citizens or from foreigners—requires that the market rate of interest be paid on the funds.That increases the budget dollars that must be used in the future to repay the debt，thereby diverting funds away from other priorities，such as education or environmental protection.Too much debt also raises the possibility of a default，which can destroy citizens'confidence in a government.This leaves taxation as the most preferred(or，in the view of many，the least distasteful)means of generating funds.There are also limits on a society's“tax tolerance”.Most citizens see the need for taxes，if society is to function.It is too simplistic to say that taxpayers would rather not pay taxes.Rather，there is an unseen“upper limit”on most taxpayers'willingness to pay(probably different for different taxpayers)，and on their ability to pay.Limitations on willingness and ability to pay also vary considerably according to the type of tax.

Individual and Corporate Income Taxes．Taxes levied on the income individuals earn from wages，salaries，and some forms of investment are called income taxes.Income taxes can be progressive，regressive，or proportional.A progressive tax claims a larger proportion of an individual's gross income at higher income levels than at lower levels.This is based on the notion that those with a greater ability to pay should pay more.A regressive system has the opposite effect.It takes a higher proportion of the gross income of those at lower，rather than higher income levels.Finally，tax systems that result in an equal proportion of one's income paid in taxes，regardless of income level，is termed a proportional tax system.(https://www.daowen.com)

Taxes levied on the sale and use of goods and services in states and/or localities are called sales and use taxes.The main advantages of the sales taxes are their broad tax base—all retail sales—capable of producing plentiful revenue，and they are relatively easy to collect.However，there are some potential drawbacks.First，sales taxes are highly visible，precisely because nearly everyone pays them.This makes sales tax rates politically difficult to raise.Second，sales taxes tend to be highly regressive taxes，with the burden falling disproportionately greater on lowerincome families.Third，high sales tax rates can encourage residents to shop elsewhere.Taxes on real estate of various kinds are called property taxes—the mainstay of local governmental revenues.There is a great variety of other sources of governmental revenues，including excise taxes;motor fuel taxes;business taxes;inheritance taxes;capital gains taxes;license fees;users fees;lotteries;sale of utilities，such as water or electricity;and the operation of liquor stores.

Governments must consider the economic effects of a particular means of raising revenue.As previously，some forms of taxation can be counterproductive;that is，raising the tax or user fee may provide less revenue，because it will encourage individuals to move from one jurisdiction to another，shop elsewhere，or avoid publicly provided services such as transportation that are considered too costly.Eventually，all tax and revenue-raising devices can reach their limits of efficacy by draining too much from the private sector and reducing private incentives to work.Although we are sometimes accustomed to believe that governments can raise as much money as they want，in truth there are substantial limitations on the ability of the public sector to finance itself.These limits must be taken into account in developing governmental budgets if political and economic crises are to be avoided.