What makes Delaware a tax shelter?

Delaware is a tax shelter because it has business-friendly usury laws and light taxation, and because companies incorporated there don’t have to conduct their business in Delaware. Delaware also has a separate court system for corporate litigation.

Does setting tariffs protect domestic industries?

Tariffs are meant to protect domestic industries by putting taxes on imported products made by foreign competitors to make them cost more. They can also erode competitiveness in the protected industry.

Where do tax havens get revenue?

Most governments get revenues through taxation . Tax havens , however, rely on customs and import duties, corporate registration and fees, and departure ( airport ) taxes on travelers.

How does the IRS find out that someone is cheating on their taxes?

Computer data analysis is the key tool—using its own Information Returns Processing system, plus medical records, credit card transactions and other electronic information, including, possibly, social media postings.

Who has to worry about the chicken tax?

Hint: It isn’t chickens. Or chicken farmers. The chicken tax is a 25% tariff on light truck imports originally imposed in 1963 to retaliate against European tariffs on American chicken. It still exists.

Tax Laws

Understand how tax laws work, how they affect the economy, and the ways in which they can be used to achieve fiscal and social goals.

Small wooden tiles reading TAX next to money and a pushpin, all on a calendar

A Brief History of Taxes in the U.S.

Amy Fontinelle

Updated Mar 23, 2022

Regressive, Proportional, and Progressive Taxes: What's the Difference?

Melissa Horton

Updated May 20, 2022

American flag with United States dollar bill

How Taxes Affect the Economy

Geoffrey Michael

Updated Aug 27, 2021

Tax Withholding: Good For Government, Bad For Taxpayers

Amy Fontinelle

Updated Jun 07, 2022

What's Wrong With the American Tax System

Michelle P. Scott

Updated Sep 02, 2022

Frequently Asked Questions

Do nonprofit organizations pay taxes?

Nonprofits that meet IRS criteria are exempt from federal taxes, as well as from property and sales taxes. They do pay payroll taxes and may owe taxes on activities that are not part of their nonprofit goals, such as selling products in a museum gift shop.

Learn More: Do Nonprofit Organizations Pay Taxes?
What makes Delaware a tax shelter?

Delaware is a tax shelter because it has business-friendly usury laws and light taxation, and because companies incorporated there don’t have to conduct their business in Delaware. Delaware also has a separate court system for corporate litigation.

Learn More: Why Delaware Is Considered a Tax Shelter
Does setting tariffs protect domestic industries?

Tariffs are meant to protect domestic industries by putting taxes on imported products made by foreign competitors to make them cost more. They can also erode competitiveness in the protected industry.

Learn More: How Do Tariffs Protect Domestic Industries?
Where do tax havens get revenue?

Most governments get revenues through taxation. Tax havens, however, rely on customs and import duties, corporate registration and fees, and departure (airport) taxes on travelers.

Learn More: 3 Ways Tax Haven Governments Make Money
How does the IRS find out that someone is cheating on their taxes?

Computer data analysis is the key tool—using its own Information Returns Processing system, plus medical records, credit card transactions and other electronic information, including, possibly, social media postings.

Learn More: How the IRS Catches Tax Cheats and Liars
Who has to worry about the chicken tax?

Hint: It isn’t chickens. Or chicken farmers. The chicken tax is a 25% tariff on light truck imports originally imposed in 1963 to retaliate against European tariffs on American chicken. It still exists.

Learn More: Chicken Tax

Key Terms

Taxation

Taxation is a fee required to be paid to a government by citizens, businesses. It can also be imposed on physical assets, such as property, and on transactions, such as the sale of a home or stock. Types of taxes include income, corporate, capital gains, property, inheritance, and sales.

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Value-Added Tax

VAT is a consumption tax added to goods and services at every point of the supply chain, from initial production to point of sale.

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Double Taxation

This is when income tax is paid twice on the same source of include, such as when stock dividends are taxed both at the corporate level and the personal level—or when the same income is taxed by two different countries.

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Kiddie Tax

This is a special tax law created in 1986 to address investment and unearned income tax for individuals 18 or under or dependent full-time students under age 24.

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Tax-Advantaged

This refers to favorable tax status given to certain qualified investments, accounts, or other financial vehicles. Common examples: municipal bonds, partnerships, and annuities, as well as retirement plans such as 401(k)s and IRAs.

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SALT (State and Local Tax)

This acronym stands for state and local tax and is generally associated with the federal income tax deduction for state and local taxes available to taxpayers who itemize their deductions.

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Goods and Services Tax (GST)

This tax on goods and services sold domestically is added to the cost of the product at the point of sale and is remitted to the government by the seller.

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