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	Tax Purposes and Effects of Taxation   Property Taxation: Depreciation Taxation of Profit Adjusted Basis Home Mortgage Interest and Points Deduction   1031 EXCHANGES Capital Gains Tax Corporate Tax Corporation Dividend Tax Double Taxation European Union Savings Taxation Homeowners exemption Foreign Investment in Real Property Tax Act. Flat Tax Principles of Income Tax Income taxes Inheritance Tax Installment Sales Poll Tax Progressive Tax Property taxes California Propositions Purposes and Effects of Taxation Retirement Tax Sales Tax Sales leaseback Tariff Tax Credit, Exemption Equivalent and Tax Tax Rates Tax Treaty Direct and Indirect Taxation Value Added Tax The funds raised by taxation have customarily been used by different states and their functional equivalents throughout history to carry out the functions such as: o Upkeep of public property o Economic infrastructure - roads, legal tender, enforcement of contracts, etc. o Enforcement of law and public order o Protection of property o Military defense o Redistribution of wealth o The operational costs involved in the running of the government itself o Any work in favor of public interest So also, most modern day governments also use taxes to fund welfare and public services, such as: o Pensions for the elderly o Unemployment benefits o Education systems o Health care systems o Energy, water and waste management systems o Public transportation States that were colonies of bigger super power nations which are on the road to modernization have also used cash taxes to draw or force reluctant subsistence producers into cash economies. Various government bodies use different kinds of taxes and vary the tax rates with the following intentions in mind: o In order to redistribute resources between individuals or classes within the population. In olden times, the nobility were supported by the taxes paid by the poor, however, in modern social security systems, taxes are intended to support the poor, the disabled or those retired from service, by taxes on those who are still working o In order to distribute the tax burden between individuals or strata of the population involved in taxable activities, with high turn over of income such as businesses o In order to modify patterns of consumption or employment within an economy, by making some types of transactions more or less attractive o In order to influence the macro-economic performance of the economy (the government's strategy for doing this is referred to as its fiscal policy) The resources taken from the common man through taxation is always more or less greater than the amount that can be used by the government. This difference is called the compliance cost, and includes, for example, the labor cost and other expenses incurred while executing compliance with tax laws and rules. The collection of a tax in order to spend it on a particular purpose, for instance, collection of taxes on alcohol to pay directly to maintain alcoholism rehabilitation centers, is called hypothecation. This practice is seldom liked by finance ministers, since it greatly hampers their freedom of action. Some economic theorists consider this concept to be morally dishonest, since in reality the money is generated by a means that further eats into society. Furthermore, it also often occurs that taxes or excises initially levied to fund a specific government program are later diverted to the government's general fund. In some cases, such taxes are collected in fundamentally inefficient ways, exemplified by highway tolls. Some economists, especially neo-classical ones argue that all types of taxation result in distortion of the market and economic inefficiency. They have therefore sought to identify and develop a system of taxation that would minimize this distortion. One of the theories is that the most economically neutral tax is the tax on land. A government's primary duty must be to maintain and defend the title to land, and therefore it must collect most of its revenues in order to provide for this unique service. Since governments also play a role in resolving commercial disputes, especially in countries where a common law is executed, this doctrine is often used to justify a sales tax or a value added tax. Other libertarians argue that almost all forms of taxes are immoral due to their involuntary and therefore eventually coercive or violent nature. The most extreme anti-tax view is that of anarcho-capitalism, in which the provision of the state interfering with an individual's earnings or demanding a share of it to facilitate salvaging downtrodden classes of society is looked upon with intense scorn.