Taxation morphs and evolves as it settles into an acceptable median between the government and its citizens, and over the years the government invents new ways to tax as people discover new ways to be relieved of taxes. Taxes come in many forms but they can be described as either taxing income, taxing consumption, or taxing possession.

Taxing income is used by politicians to persuade the public to act or follow a desired trend and every year the tax code is altered to accommodate or cash in on business and individual innovations. The federal government along with many state and local governments implement some sort of income tax. It is a levy on the gross income earned or assembled by an individual or corporate entity. An income tax can be described in three ways: regressive, proportional, or progressive. A regressive system taxes each entity the same amount. It is regressive in nature, for example a millionaire and a bum are taxed a dollar each week, for the millionaire the dollar is nothing but for the bum it may be hard to come by; the poor do not have the resources and thus feel a harder hit from taxation. Now a proportional system taxes income by a constant tax rate. For example, a man earning $100 and a man earning $50 are taxed at the same rate of 10%; one pays $10 in taxes the other pays $5 in taxes. Today our federal government exercises a taxing scheme which is progressive in nature. A progressive system taxes wealth with an increasing tax rate. As acuminated wealth reaches a set dollar amount, dollars earn after are taxed by an increased rate.

The federal government taxes the gross income of individuals and corporate entities, but it allows exemptions and deductions to be utilized in calculating the tax obligation owed. In trying to persuade just about every action taken by entrepreneurs the tax code has become fairly complex. In 1862 an income tax was original enacted to provide funds for the American Civil War and then was repealed 10 years later by congress [1]. Later it was reintroduced but deemed unconstitutional until the ratification of the 16th amendment [1] giving the federal government the authority to enact a tax on any source without apportioning it out to the states [2]. According to the FairTax book, “Since 1954, the number of words in our tax code has increased by nearly 500 percent” [3].

The environment manifested by the income tax system can be confusing, can be expensive, and can be a nuisance for the professional. Creation of exemptions and deductions for individual endeavors in many cases leaves the tax code to be interpreted by professional tax preparers. Either the business hires an in-house accountant or pays for a third party consultant. A firm may hire someone as an office manager to handle business accounts and payroll. Paying taxes requires experience, and unless one has thrust themselves into the arena on first approach may become overwhelmed by the countless forms and procedures required to satisfy the government and may decide to neglect the hassle to someone else. Another drawback or nuisance incurred by the professional is the taxation on investment aspirations, by reinvesting the income earned opportunity comes with a tax. Through withholding the federal government collects half of the percentage owed by the individual and collects the other half owed from the individual’s employer. Theoretical the employee’s take-home-pay is affected in two ways. First of which is from tax withholding stated on the paystub and the second is a loss in real wage to offset the employer’s employment tax obligations. For example, an employer’s budget would need to include the expense of covering employment taxes and the associated cost of processing them.

Taxing consumption is similar to that of taxing income; just the role of who is obligated to report a particular portion of the tax revenue is switch. Instead of the income earner having to report his/her taxes to the federal government, the recipient of these taxes through purchases is obligated to transfer the tax over to the government; a typical sales tax, for example we pay 7cents to every dollar on all purchases in Alachua County at the cash register (In this manner a flat sales tax is regressive because it doesn’t distinguish between the resource availability of an individual). The government doesn’t collect taxes until a purchase of a sale or service has been rendered. Imposing consumption taxes has become an art perfected by state and local governments in collecting revenue without greatly upsetting their constituents.

For an entrepreneur who wishes to operate or do business within a certain local should be aware of all local taxes and regulations concerning the sale of a good or service. In some instance the firm maybe required to pay a tax that exist within the home region even though one doesn’t exist outside the area, or vice-versa.

The third type of taxation is that levied upon possession. Through licensures and fees a professional gains the right to possess a license to operate. According to Florida Statute Ch. 205 local governments are given the authority to charge a fee for the privilege to do business within its jurisdiction [4]. Local governments include any county or incorporated municipality. Also tangible interest held by the business such as office space or equipment maybe taxed on their respective values [5]. An expanding business needs to be aware of tax rates and fees levied by the jurisdiction for where assets maybe located or operated.