Final answer:
Governments raise money through taxation, such as sales taxes, customs and tariffs, and fees for services, as well as through government borrowing by selling bonds.
Step-by-step explanation:
Governments raise money to fund government services primarily through taxation, which includes levies on income, property, and sales of commodities. By imposing sales taxes, governments collect a percentage of the purchase price of goods sold within their jurisdiction. This is a significant source of revenue for state and local governments. Additionally, governments may impose customs and tariffs on foreign imports to generate income. Furthermore, various levels of government can levy fees for specific services, such as license plates and hunting licenses. However, besides taxes, governments can also raise funds through government borrowing, by selling bonds to finance projects and services, which spreads the cost over generations. It is crucial for tax policy to balance the need for revenue while also considering the impact on economic growth, avoiding overly taxing behaviors such as consumption or investment that might be counterproductive.