1 In order for states to provide for their citizens, the U.S. Constitution granted them the power to collect taxes. Each state is different in its choice of how to collect revenue from its citizens. The taxes used in most states are sales and income taxes. Other types of revenue include fees, federal grants, and lotteries.
2 Although each state is different, the majority of states use both a sales and income tax to raise revenues. A sales tax is collected whenever a good or service is purchased within a state. In some states, certain goods are excluded from a sales tax. Food, medicine, and clothing are among the items that are left untaxed in some states. Many states also place a tax on income. Both people and businesses pay income taxes. In a few states, the income tax is only levied on interest and dividends. Special types of sales taxes include taxing hotel rooms, restaurant meals, cigarettes, and alcohol.
3 Have you gone to get your driver's license yet? Do you own a car? Do you hunt or fish? States collect fees for many types of licenses. When you are able to drive, you will pay a fee to get a driver's license. If you own a car, you will pay a fee to drive it on the road. In order to protect wildlife, hunters usually pay a fee for the privilege to hunt or fish. Other fees include state college tuition, tolls along highways, and licenses for professions such as doctors, plumbers, pharmacists, hairdressers, dentists, and teachers.
