What type of tax is income tax?

Income tax is correctly classified as a tax on a person’s wages because it applies to the earnings that individuals receive from their employment or other income sources. This tax is typically imposed on a portion of an individual's income, where the amount owed can vary based on the income level and tax rates set by government authorities.

This classification is important because it distinguishes income tax from other types of taxation, such as taxes on goods and services, which are levied on the sale of products and services (like VAT), or corporate profits, which are taxes applied to the earnings of companies. Capital gains tax, on the other hand, is specifically targeted at profits earned from the sale of an asset, such as stocks or real estate.

By understanding that income tax is specifically related to personal wages and earnings, it highlights the role of this tax in the overall tax system and its impact on individuals' disposable income.