License Fees vs Taxes: Key Differences Quiz

Fundamental Powers of the State

• The state has inherent powers, including police power, eminent domain, and taxation.
• Police Power: The state's ability to enact laws for public health, safety, morals, and welfare. It can regulate both liberty and property to promote these interests. Taxes can be used to support public welfare.
• Eminent Domain: The power to take private property for public use, as long as just compensation is paid.
• Taxation: The state's power to raise revenue to pay for government expenses. This funding is essential for the state to operate.

Similarities among Powers

• All three powers are inherent in the state and don't require specific constitutional grants.
• The powers are indispensable for the state to function effectively.
• They are all legislative in nature.
• All three powers presuppose equal compensation.

Differences among Powers

• Authority: Taxation is exercised by the government or political subdivision; police power is also exercised by the government or public service companies/utilities (if authorized by law); eminent domain is exercised by the government.
• Purpose: Taxation is for revenue for the support of the government; police power promotes general welfare through regulations; eminent domain facilitates the state's need for property for public use.
• Scope: Taxation applies to all persons, property, rights, and privileges; police power also applies to all these things; eminent domain specifically affects individuals as owners of property.
• Effect: Taxation involves transferring funds needed for public use from individuals; police power regulates but does not transfer property ownership; eminent domain transfers the full or part ownership of property.

Principles of Taxation

• Definition: Taxation is the sovereign state's power to impose charges on persons, property, or rights to fund government operations.
• Purpose: Primary purpose is to raise revenue; secondary purposes include regulation, reducing wealth inequalities, and promoting general welfare for economic growth.
• Bases: Necessity of government, reciprocal duties (protection and support between state and citizens)

Scope of Taxation

• The power is supreme, plenary, unlimited, and comprehensive,
• Key limitations include inherent, contractual, and constitutional limitations.

Aspects/Stages of Taxation

• Levying: Legislative act of establishing the tax.
• Assessment & Collection: Administrative process of determining and collecting the tax.

Basic Principles of a Sound Tax System

• Fiscal Adequacy: Revenue collection sufficient to cover government expenses.
• Theoretical Justice: Tax burden proportionate to the taxpayer's ability to pay.
• Administrative Feasibility: Clear, manageable, and administrable tax system.

Inherent Limitations

• They restrict the taxing power although not explicitly in the Constitution.
• Public Purpose: Funds must be used for the benefit of the whole community.
• Territorial Jurisdiction: Taxes are enforceable only within the state's borders.
• International Comity: A state cannot tax the property of a foreign government.
• Non-delegation: The taxing power cannot be delegated to another branch of government (executive or judicial).

Constitutional Limitations

• Restrictions on the taxing power explicitly defined in the Constitution.
• Due Process: Right to fair procedures before the government action.
• Equal Protection: Uniform treatment of similar persons and situations regarding taxes.
• Uniformity and Equity: Consistent and fair application of taxes (same class, same rate).
• Non-Imprisonment: No imprisonment for failure to pay a poll tax.
• Non-impairment of Contracts: Laws cannot affect previously formed agreements.
• Non-infringement of Religious Freedom: No law respecting or prohibiting the free exercise of religion.

Other Aspects of Taxation

• Tax Avoidance: Using legal means to minimize tax liabilities.
• Tax Evasion: Using illegal means to minimize tax liabilities.
• Tax Types: Different types of taxes such as direct, indirect, or specific.
• Situs of Taxation: The location where property or individuals are considered for tax purposes.

Tax Administration

• Bureau of Internal Revenue: Primary governmental body responsible for collecting taxes.
• Administrative Agencies: Entities responsible for enforcing tax payment.