Taxation in the United States is a complex system which may involve payments to at least four different levels of government:
The federal government is now financed primarily by personal and corporate income taxes. While it was originally funded via tariffs upon imported goods, tariffs now represent only a minor portion of federal income. There are also non-tax fees to recompense agencies for services or to fill specific trust funds such as the fee placed upon airline tickets for airport expansion and air traffic control. Often the receipts intended to be placed “trust” funds are used for other purposes, with the government posting an IOU (‘I owe you’) in the form of a federal bond or other accounting instrument, then spending the money on unrelated current expenditures.
The federal government collects several specific taxes in addition to the general income tax. Social Security and Medicare are large social support programs which are funded by taxes on personal earned income. Estate Taxes are taxes on inheritance. Net long-term capital gains, including certain types of qualified dividend income, are taxed preferentially.
Federal excise taxes are applied to specific items such as motor fuels, tires, telephone usage, tobacco products, and alcoholic beverages. Excise taxes are often, but not always, allocated to special funds related to the object or activity taxed.Local government is typically financed by value-based property taxes, mainly on real estate. Additional taxes may be in the form of fixed sales taxes. Local government fees such as building permit fees may reflect the added capital cost and operating costs of services such as schools and parks. Local governments may also collect fines (parking and traffic tickets), income tax, gross receipts or gross payroll tax, or a portion of sales taxes (such as meal taxes) collected by the state. In California, seeds, bulbs, starter plants and trees obtained from a garden center are taxed if adjudged for decorative purposes while plants for food production are untaxed, as is food in California.
The Federal Tax code is complex. This complexity generally arises from two factors: the use of the tax code for purposes other than raising revenue, and the feedback process of amending the code.While its main intent is to provide revenue for the federal government, the tax code is frequently used to direct the behavior of businesses and individuals in an attempt to achieve social, economic, and political goals. For example, the tax law provides a deduction for mortgage interest in order to encourage home ownership. A theoretically pure income tax would not allow this deduction, which is not an expense incurred for the production of income.
Because the government uses the tax code as an instrument of social policy, the code as a whole appears to lack a coherent organizing principle. This lack of a coherent organizing principle has become magnified over time, due to the interplay between successive legislative amendments and regulatory changes to the law and the private sector responses to those amendments and changes. For instance, suppose that Congress enacts a tax credit to encourage a particular type of activity. In response, a group of taxpayers who are not the intended beneficiaries of the credit re-order their affairs, or the superficial aspects of their affairs, to qualify for the credit. Congress responds by amending the code to add restrictions and target the credit more effectively.
In general, the U.S. income tax is highly progressive, at least with respect to individuals that earn wage income. As of 2001, the top 1 percent of individual taxpayers paid approximately 23 percent of all federal taxes. The top 5 percent paid approximately 39 percent, and the top 10 percent paid 50 percent of all federal taxes. The bottom 20 percent of taxpayers paid a little over 1 percent of all federal taxes. Moreover, the progressivity of the U.S. tax system has gradually increased over recent decades. The top 20 percent of taxpayers paid approximately 56 percent of all taxes in 1980, and this figure gradually has risen to 65 percent, as of 2001. In recent years, however, a reduction in the tax rates applicable to capital gains has significantly reduced the income tax burden on non-wage income. In this regard, the general structure of the U.S. tax system has begun to resemble a partial consumption-tax regime.
Tax Law is the system of laws which govern the taxes the government levies. The government of all states levies a charge on the economic transactions and these are known as taxes. Tax Laws of a state includes everything ranging from the federal and state income payroll and sales taxes to will trusts, estate planning and many more.
Tax law is the codified system of laws that describes government levies on economic transactions commonly called taxes. Tax Law in broader senses encompasses everything from state and federal income payroll and sales taxes to wills trusts estate planning and IRS audit protection.
Both individuals and corporate are required filing income tax returns but it is not necessary for everybody to pay the income tax, sales tax and the other taxes. The government has listed certain exemptions in all the cases and for all the taxes that the government levies.
There are federal tax laws which govern the citizens of the United States. The government levies income taxes, sales tax, payroll tax and many others. There are laws for each of the taxes like estate tax laws, sales tax laws and others.
To know the taxes and the legalities you should contact us. We have expert tax law advisors who guide you through the tax related legal issues. The tax law help from our team of experts will help and guide you through the issues at reasonable costs and with much less headache.
In law schools “tax law” is a sub discipline and area of specialist study. Its specialists are most commonly employed in consultative roles but they can be involved in litigation.
States of Florida and Nevada do not have an income tax. Citizens of other states of U.S are subject to the federal income tax. Individuals and corporations are both required to file income tax returns. However not everyone is required to pay income tax return service tax and other such taxes have to be paid by all. Certain exemptions may be given by government in special cases.
Some of the prevailing taxes are:
Inheritance tax estate tax and death duty are the names given to various taxes which arise on the death of an individual. In United States tax law; there is a distinction between an estate tax and an inheritance tax: the former taxes the personal representatives of the deceased while the latter taxes the beneficiaries of the estate.
A gift tax is a transfer tax imposed on the value of certain gifts. In the United States the gift tax is imposed on the gratuitous transfer of monetary and non-monetary property and is generally paid by the donor. In the U.S. the gift tax is governed by Chapter 12 Subtitle B of the Internal Revenue Code.
Sales tax also known as “gross receipts tax” is imposed by state and local governments on the sale of products and services. Depending on the geographic location of your business certain goods and services may or may not be subject to a sales tax.
Payroll taxes are state and federal taxes that an employer is required to withhold and pay on behalf of his employees.
Taxes levied on the income generated because of ones professional activities.
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