Final answer:
The tax rate is the percentage at which a tax base is taxed to generate revenue for government services. It varies with the economy and is set to balance government revenue needs and economic effects.
Step-by-step explanation:
The tax rate determines the level of taxes imposed on the tax base and is usually expressed as a percentage. Taxes can fluctuate with economic activity, rising during periods of growth and falling during recessions.
In the U.S., the government collects taxes to fund various services, and the aggregate tax from federal, state, and local levels typically ranges from 30-35% of income.
The tax base is the total amount of assets or revenue that is subject to tax by a governing authority; for example, income for income taxes or property value for property taxes.
As the economy expands, tax revenues usually increase due to a larger tax base. Conversely, tax cuts might initially reduce revenues but can also lead to an expanded tax base if they stimulate economic growth.
Federal, state, and local taxes fund different levels of government services, such as public safety, education, and infrastructure. Setting the tax rate appropriately is essential for the government to balance the need for revenue with the economic impact on taxpayers.