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The purpose and effects of taxes Money provided by taxation has been used by states throughout history to carry out many func Some of these include expenditures on war, the enforcement of law and public order protectio property, economic infrastructure and operation of government itself. Governments also use to fund welfare and public services. These services can include: education system, health care syste pension for the elderly and public transportation. Colonial and modernizing states have also used cash taxes to draw or force reluctant subsistence producers into cash economies. Governments use different kinds of taxes vary the tax rates. This is done to distribute tax burden among individuals/classes involved taxable activities, such as business or redistribute resources between individuals classes in the population. Historically, the nobility depended economically on taxes applied to the poor. Modern social security systems are intended to support the poor, the disabled and the ones who are retired by imposing taxes on those are working. In addition, taxes are applied to fund foreign aid and military ventures and also influence the macroeconomic performance of the economy. The government's strategy for doing this is called its fiscal policy, or to modify patterns of consumption or employment within an economy, by making some classes of transaction more or less attractive.