Surtaxes are additional taxes that are assessed on assets that have already been taxed. In some cases, the surtax is actually an additional tax on taxes that have already been paid. While there are several different models used in order to implement a tax structure of this nature, a surtax typically involves enacting legislation that authorizes a levy on the income of a business or individual, when the net income generated within a specified period is over a certain figure.
Just about every nation makes use of some type of surtax as a means of generating additional revenues for use with different governmental functions, or to meet some type of additional burden on the resources of the country. In wartime, the use of a surtax to fund the war effort is not unusual. One model for this type of levied tax is to impose an additional tax that is paid after the standard and usual income taxes have been calculated. In many cases, this additional tax is a fixed percentage of either the taxes due on income generated, or a portion of the income that exceeds a base amount.
A surtax may be calculated as a graduated income tax. With this model, several tiers of income levels are put in place. The actual percentage of the surtax depends on which of these levels or tiers is relevant to the income generated. For example, if the taxable income falls between $500,000 and $1,000,000 US Dollars (USD), the taxpayer pays an extra tax of two percent. Should the taxable income exceed the $1,000,000 USD figure, the taxpayer is assessed a surtax of the four percent.
The implementation of a surtax may take place in times other than wartime. One example is when a nation is attempting to recover from a recession. Here, the idea is to impose a tax that applies only to individuals and businesses that generate substantial incomes during the course of a tax year. The additional tax generates funds that the government can use to stimulate the economy, possibly resulting in lowering the unemployment rate and stimulating the production of goods and services. While there are proponents who see this added tax as an ideal way to accomplish this goal, others feel that the surcharge does more harm than good. The idea is that the tax minimizes the resources that businesses could use to recall employees who were laid off, or to fund other strategies that benefit the communities where those companies are established.
