Final answer:
The process of collecting taxes and redistributing some of that money to the states is known as intergovernmental revenues, which fund essential services like welfare, healthcare, and education. This system helps to provide a balanced provision of services, particularly in states that do not collect certain taxes.
Step-by-step explanation:
Tax Collection and Intergovernmental Revenues
The process of collecting taxes and then redistributing a portion of that money back to the states is known as interventional revenues. The federal government collects revenue through various taxes and then allocates funds to state and local governments to support public services. This system ensures that even if a state does not collect certain taxes, like a sales tax, it can still receive funding for essential services like welfare, healthcare, and education. While states and local governments have their own revenue mostly through sales tax, federal taxes help to maintain a balanced provision of public services across the country.
It is interesting to note that some states, such as Delaware, New Hampshire, Montana, Oregon, and Alaska, do not collect a state sales tax. Still, these states may have higher taxes in other areas to compensate for revenue. Some businesses are allowed to keep a small portion of the tax to compensate for the administrative costs.
Guiding policies at national, state, and local levels determine how tax revenues are raised and spent, affecting the economy and the well-being of citizens. All members of society share the responsibility of enabling the government to raise revenue through taxation, contributing to the provision of public goods and services.