7.1 Why Taxes Exist

Notes

Taxes are required payments to governments. They fund public goods and services that people share.

• Examples of what taxes pay for: roads and bridges, public schools, police and fire services, national defense, parks, courts, and programs such as Social Security and Medicare.
• Federal, state and local governments each collect taxes and provide services.
• Governments decide tax rules through elected officials.
• Not paying taxes you owe is illegal, but you can legally lower your tax with deductions and credits.
• Tax rates in this course are made up for practice. Real rules change often.