Tax Laws & Regulations

Taxes are how governments raise money. They can be progressive or regressive and also can be used to promote or discourage certain financial activities or as geopolitical tools.

Frequently Asked Questions
  • How do tax laws affect the economy?

    There are debates on the value of higher or lower taxes, and various U.S. presidents have shaped tax policy in ways that benefit different types of individual taxpayers, as well as corporations. Disagreement continues on whether higher tax rates result in more revenue.

  • What makes Delaware a tax shelter?

    There is no sales tax in Delaware, and Delaware corporations–whether located in the state or not–benefit from a huge list of other tax breaks. There is no sales tax, no tax for in-state purchases, no state corporate income tax on goods and services, no corporate tax on interest or other investment income, no personal property tax. There are also no value-added taxes (VATs), no tax on business transactions, and no use, inventory or unitary tax. There is no inheritance tax in Delaware, and there are no capital shares or stock transfer taxes.

  • Do nonprofit organizations have to pay taxes?

    Nonprofit organizations are exempt from federal income tax, property tax, and sales tax. They do have to pay payroll taxes (to fund Social Security and Medicare). Those engaged in activities unrelated to their charitable purposes may need to pay income taxes on those activities. And they have to file tax returns.

  • How does tax withholding affect taxpayers?

    It ensures that taxes are paid with no end-of-year shortfall and can provide a refund that recipients like, but that actually represents an interest-free loan to the government. It also ensures a regular flow of income to governments that funds ongoing operations and limits tax evasion.

  • Do tariffs protect domestic businesses?

    Tariffs, which tax imports, can protect domestic businesses by making foreign goods cost more than similar ones manufactured by domestic companies. On the other hand, they can damage other domestic businesses by increasing the costs of imported components or raw materials that these companies need to manufacture their products.

  • How does a government that’s a tax haven make money?

    Tax havens have other ways than charging taxes to raise funds. These include imposing custom and import duties; charging fees for corporate registration and registration renewals to companies that register their businesses in the tax haven; and taxing tourists through departure taxes, especially if the haven is a vacation destination, such as Barbados.

Key Terms

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