State and local tax collection systems in the United States are complex and varied, with different taxes imposed by different levels of government. The United States of America has separate federal, state, and local governments and taxes are levied at each of these levels. Taxes are levied on income, wages, wealth, sales, capital gains, dividends, imports, wealth and gifts, and miscellaneous fees. According to the Census Bureau, state government tax collections totaled $1,066.1 billion in fiscal year 2020, down 2.5 percent from the $1,093.4 billion collected in fiscal year 2019. In 2020, taxes collected by federal, state, and local governments amounted to 25.5% of GDP, below the OECD average of 33.5% of GDP.
The main state taxes are income tax, sales tax, property tax, and others. Local governments such as counties, cities, school districts, and special tax districts also collect taxes from residents and their businesses. Local income taxes are imposed by 5,055 jurisdictions in 16 states, ranging from the minimum wage tax to the state average of more than 2.3 percent of Maryland's adjusted gross income. Local income taxes may be levied directly by municipalities or included in the state income tax system. Local governments are also heavily dependent on property taxes, which accounted for 72 percent of their total self-employment revenue in 2018. State and local tax collection varies widely from country to country, reflecting the economic conditions, tax policy choices and spending needs.
Property tax is the main source of local tax revenue, accounting for 72.2% of total local tax revenue in tax year 2020 (the most recent year for which data are available). They were also once important drivers of government budgets, their share of government revenue having dropped to just 1.8%.
In fiscal year 2020, corporate taxes generated only 3.3 percent of state and local tax revenue. They are also one of the most volatile sources of income in the states.
Individual income tax is the state's largest source of tax revenue, although nine states exempt payroll income from taxes. Income taxes are less growth-friendly than consumption taxes because they discourage saving and participation in labor.
Sales taxes generated 32.2 percent of state tax revenue in fiscal 2020 and are a significant source of revenue for all 45 states that adopt them. In some states, they are the main source of local government revenue.
There is considerable regional variation in the degree of tax dependency, with states in the Southwest relying most heavily on property taxes and sales taxes as a source of state and local tax revenue, while states in the Middle East and New England rely most on income taxes. Mining taxes have a huge impact on the more resource-rich Far West. The mix of tax sources chosen by states can be important for both income stability and economic growth, and the many variations between states indicate that states value key goals. various competition books.
Differences in the States
Maine has a blueberry tax, and Alabama's comprehensive constitution specifically provides for a mosquito tax in Mobile County—unfortunately, the tax applies to real property, not mosquitoes—but when state and local governments want it. increase revenue, they tend to switch to traditional taxes. tax law. tax options such as property taxes, sales taxes, and personal and corporate income taxes. However, the extent to which countries rely on these options and the extent to which they turn to alternatives varies by demographics, geography, and even ideology.
Oregon receives nearly three-quarters of the state's tax revenue from personal and corporate income taxes, while North Dakota receives just over a tenth of revenue this way. In New England, less than 1 percent of local government tax revenue comes from sales taxes, compared with 25.1 percent in the Rockies. In New Hampshire, a "live and die free" nation, 27.3% of state tax revenue comes from corporate taxes, while Hawaii's corporate tax accounts for only 0.6% of state tax revenue.
A state with rich natural resources, such as North Dakota, may rely primarily on mining taxes, while a state with a high number of tourists, such as Florida, may receive Point out depends heavily on sales tax. Some states, especially in New England and to a lesser extent in the Southwest, have a long tradition of both state and local property taxes, while others, particularly in the Southeast and Southwest, widely used general sales tax at both levels of government.
Property taxes are the largest combined source of state and local tax revenue in the United States, accounting for 32.2 percent of total state and local tax revenue in fiscal year 2020 (the latest available year). This is almost entirely because property taxes dominate local revenue, where they account for 72.2% of total tax revenue. Most states have abandoned or nearly abandoned dependence on the statewide estate tax, which now accounts for just 1.8% of national tax revenue, down from 52.6% in 1902.
This category includes taxes on commercial and residential property, as well as taxes on tangible personal property, on business equipment, and certain types of personal property, such as cars and boats. . Property taxes are typically a source of local tax revenue, while individual property taxes may be funded by state or local governments or both. Countries are moving away from personal property taxes, but for now, many of these taxes still apply.
Economists favor taxes on real estate and improvements (land and buildings) because they follow the principle of good interest, the idea of public finance that taxes must be related. closely related to the benefits received. They help pay for services related to real estate ownership - local road maintenance, law enforcement and emergency services, and more. - and the value of real estate is a reasonable, if not perfect, indicator of the cost of these services. Many economists also favor property taxes over alternative forms of taxes, such as income taxes and sales taxes, because they have a relatively limited impact on economic growth and development. While capital is usually liquid and can be transferred to lower tax jurisdictions, real estate is real property. So even though its value is affected by taxes, it cannot be transferred due to tax costs.
Tax jurisdictions levy property taxes in a variety of ways: some levy a rate or milige - a tax per thousand dollars of value - on the fair market value of the property, in where other areas tax as a percentage (valuation factor). market value gives an estimated value. Sometimes estimates are made based on potential earnings or other metrics.
Some states have affiliation requirements to ensure statewide consistency. Sometimes limits limit the amount of property tax increases in a given year, and sometimes the rate needs to be adjusted after assessment to ensure uniformity or maintain revenue. Discounts are often available to certain taxpayers, such as veterans or seniors. Locals often offer discounts or other tax benefits to select businesses. And of course, property tax rates are set by political divisions at various levels: not only in cities and counties, but often also by school boards, fire departments and utility councils. useful.
As of Fiscal Year 2020, 14 states have not adopted a state property tax at all, while local governments in all states have included property taxes in their tax structures. Property taxes account for more than 90 percent of local government tax revenue in 13 states, led by Maine with 99.0 percent of local revenue and less than half of local revenue in just four states. In New Hampshire, where property taxes account for 14.3% of state tax revenue and 97.7% of local tax revenue, 64.0% of total state and local tax revenue comes from property taxes. On the other hand, only 16.8% of state and local fees in Alabama come from property taxes.
The Southwest and New England are most dependent on property taxes (40.3% and 40.2% of revenue from state and local taxes, respectively), while the Far West is least dependent on property taxes. real estate at 28.1%.
General Sales and Gross Receipts Taxes
Sales taxes are an important source of tax revenue for both state and local governments. Although economists often make a clear distinction between general sales tax, excise tax, and gross sales tax, the U.S. Census Bureau does not distinguish between sales tax and gross sales tax. Due to these data limitations, both general sales taxes and certain gross sales taxes are included in this category, although excise taxes are treated separately under other taxes.
General sales tax is levied on goods and services in general (with a few exceptions). They are paid for by the consumer but are usually picked and shipped by retailers. Where the seller is not required by law to collect and pay sales tax, the consumer may be required to pay offset use tax directly to the government. Unlike a regular sales tax, a selective sales tax, commonly known as an excise tax, is a special tax or rate on the sale of certain goods or services. They are typically hit on motor fuels, alcoholic beverages, entertainment, insurance, tobacco products, pari-mutuels and utilities.
Finally, some states impose or allow localities to levy taxes on gross income. These are business taxes that are often levied in place of corporate income taxes, but unlike corporate taxes that allow deductions for compensation, cost of goods sold, and other expenses, gross income tax is levied. into the total income of the enterprise at low cost . possible deductions. Economists generally disapprove of taxes on gross sales because they are levied at all stages of production, resulting in a "pyramid tax" where the same transaction ends up being taxed multiple times. Taxed on gross income rather than net income (profit), such taxes also have nothing to do with a company's ability to pay.
Washington State, Tennessee, New Mexico, and Nevada have the highest percentages of state and local tax revenue from sales taxes and gross sales at 47.1, 45.9, 43.0, and 43.0, respectively. 42.1%. Tennessee, Nevada, and Washington have statewide gross income taxes: the Nevada Trade Tax, the Tennessee Corporate Tax, and the Washington Business and Occupation Tax (B&O). All three states are exempt from payroll taxes. (Washington, however, taxes capital gains on the top earners.) Both Nevada and Washington are exempt from corporate tax. The New Mexico sales tax, known as the "gross sales tax," has a very broad base that includes many factors that affect a business.
General and gross sales taxes accounted for 23.8 percent of total state and local tax revenue in fiscal 2020 and appear to be more prominent in the state than local tax revenue, which accounted for 32 percent of total state and local tax revenue. 2 percent state and 12.8 percent state and 12.8 percent local taxes. Forty-five states impose a state sales tax, while 38 states impose a local sales tax, often in the form of a local option, but sometimes as a mandatory local tax administered by the state. Alaska is unique in that it exempts state sales taxes but allows local sales taxes.
General and gross taxes account for 23.8 percent of total state and local tax revenue for the 2020 tax year and appear to be more important in the state than local tax revenue, which accounts for 32 percent. percent of total state and local tax revenue. 2% state and 12.8% state and 12.8% local taxes. Forty-five states apply a state sales tax and 38 states a local sales tax, usually a local option but sometimes a mandatory local tax administered by the state. Alaska is unique in that it exempts state sales taxes but allows local sales taxes.
General and gross taxes make up 23.8 percent of all state and local tax revenues for the 2020 tax year and appear to be more important to the state than local tax revenue, which accounts for 32 percent of the total. percent. percentage of total state and local tax revenue 2% state and 12.8% state and 12.8% local taxes. Forty-five states have state sales taxes and 38 states have local sales taxes, usually a council tax but sometimes a mandatory local tax administered by the state. Alaska is unique in that it exempts state sales taxes but allows local sales taxes.
The Southwest is most dependent on sales taxes, with 35.8% of income coming from these sources, while New England relies on sales taxes of at least 13.6%. Collecting local taxes on the sale of options is a significant source of revenue in the Rocky Mountains, but plays a minor role in New England's income structure.
Individual Income Taxes
Personal income taxes are the state's second largest source of tax revenue, accounting for 36.5% of state tax revenue in the 2020 tax year, but their modest role in local tax collection (4.9%) accounts for 22.8% of total state and local taxes, making personal income taxes the third largest source of state and local tax revenue in the nation.
Personal income taxes are the state's second largest source of tax revenue, accounting for 36.5% of total state tax revenues in the 2020 tax year, but their role is modest in local tax collection (4.9%). ) is 22.8% of total government taxes. Local tax, making personal income taxes the third largest source of state and local tax revenue in the country.
The United States Census Bureau reports local government personal income tax collection in 13 states and the District of Columbia. It could be argued that some other states have local or roughly equivalent income taxes - such as the four municipalities in West Virginia, which impose a payroll tax of $2 to $5 per week - but the analysis This is limited to states where individuals report personal information. collect income tax for the census bureau. Of these, localities in three states and the District of Columbia depend on income taxes with more than 20% of their income, most notably the Maryland local government with 34.9%, while six governments State cities with local income taxes generate less than 4% of their income. tax income. your income this way. Most states do not allow locations to collect their own income taxes.
Oregon, which is exempt from sales tax, is the most dependent on personal income tax (67.6%), while of the states that tax salary income, North Dakota has the lowest dependency on income tax - 8.7 percent Of the states that impose all major taxes, New York is the most dependent on personal income tax at 57.9%. The combined state and local government rates of states where wage income is taxed ranges from 6.4 percent in North Dakota to 40.5 percent in Maryland.
Income taxes discourage growth per unit of tax income more than consumption taxes because they discourage saving and participation in labor. In 2020, states that eliminated personal income taxes on payroll income generated nearly 200,000 taxpayers' net profits and $38.3 billion in adjusted gross income (AGI). , while states implementing all major taxes resulted in nearly 212,000 taxpayers netting. and the cash outflow was $39.2 billion. Five of the seven states that did not impose any form of income tax in the last decade have grown faster than the national average over that decade - four more than twice the national average, all among the seven states with the highest growth. with emissions from Alaska and Wyoming (which are heavily dependent on the mining industry). Traditional arguments for personal income taxes tend to focus less on state product and more on income progressiveness and diversification, although consumption taxes are less variable than income taxes. import.
The states in the Middle East and New England are most involved in personal income taxes, where the combined state and local dependency rates are 30.8% and 27.5%, respectively, while the Southwest, where income tax is only 4.7%. their.
Corporate Income Taxes
Despite attracting a lot of attention, corporate taxes make a relatively small contribution to state and local government budgets, and their revenue is often highly volatile. Corporate income tax accounts for just 3.3 percent of total state and local tax revenues, including 4.9 percent of state revenue and 1.1 percent of local revenue. Forty-four states tax corporate income. Of the six countries that eliminated corporate taxes, all but two (South Dakota and Wyoming) apply a gross income tax. New Hampshire has the highest corporate tax dependency ratio at 27.3%, although this category includes not only the state's corporate income tax but also the only value-added tax that is essentially consumption tax. This is followed by Alaska with 12.3% and a state dependency ratio of less than 10% in all but three states.
Localities in nine states tax municipal businesses, led by New York, where corporate tax accounts for 6.0% of local income. New York is a notable exception in that it is the only state in which localities (mainly New York) are more dependent on corporate income taxes than the state itself, and no other locality in the State is subject to corporate income tax Tax. corporate income tax to a greater extent. more than 3% of revenue.
A corporate tax is one of the most economically unfavorable revenue options because it discourages the activities most important to growth, such as capital investment and productivity. Governments also tend to allocate their corporate tax base through tax credits, weakening tax neutrality and increasing tax spending on discouraging businesses. Corporate income tax is the most important in New England, accounting for 5.5% of all state and local fees and 9.2% of government revenue. Local governments in the region are not allowed to tax corporate income. Southwest shows the lowest correlation at 0.5 percent of total state and local tax revenue.
While income taxes (corporate and individual), property taxes, and sales taxes (which include some gross sales) account for more than 80 percent of state and local tax revenue, the remainder includes many other taxes. Excise taxes on motor fuels, tobacco, alcohol and other products make up more than half of the 17.9 percent state and local tax revenue that is excluded from personal income taxes, corporate income tax, sales tax and property tax and are imposed to varying degrees in all states. Unlike a general sales tax, this "selective sales tax," as they are sometimes called, distinguishes between different types of transactions.
Some other sources of tax, such as the mining tax, can be quite a source of revenue for select states. In Alaska, for example, 78.1% of state tax revenue (and 37.4% of total state and local tax revenue) comes from other taxes, primarily oil and gas taxes. Other sources of tax revenue, such as auto license fees, business license fees, inheritance and estate taxes, registration fees, and property transfer taxes, have a more modest impact on businesses. revenues, but states rely on them to varying degrees.
North Dakota, another resource-rich state, is also heavily dependent on other forms of taxation: 64.7% of total state tax revenue and 48.9% of total state and local tax income. direction. Delaware, which has an extensive business licensing engine, also ranks high, with 57.6% of state tax revenue and 47.7% of total tax revenue. New Jersey, Arizona and Massachusetts had the lowest dependency rates at 12.0, 11.7 and 11.2%, respectively. Nationally, other taxes account for 24.6% of total state tax revenue and 9.1% of total local tax revenue. By region, dependency is highest in the Plains and Southeast and lowest in New England.
Competition in State Tax Structure
State tax structures vary widely. The highest-income states rely more heavily on property taxes, while the lowest-income states rely on sales and gross income taxes. This is largely a result of the higher sales tax-oriented Southern states disproportionately falling into the last quintile, while the New England states focusing on property taxes can be found found in the top quintile, although the effect persisted even in the absence of these states. Personal income tax use is not strongly correlated with state median household income.
Over the years, income tax has established itself as a source of state and local tax revenue, sales tax collection has remained largely unchanged, and reliance on estate taxes has plummeted. Property taxes are still the main source of local government revenue, but they have long since lost their importance at the state level. Prior to 1920, property taxes generated more than 80 percent of total state and local tax revenues; Currently, property tax accounts for less than 1/3 of the fee.
These changes have economic implications. Some states choose to waive certain taxes, usually to stimulate economic activity. Other states impose all major taxes, usually to diversify sources of income. Taxes vary in their degree of income stability, with the corporate tax typically being one of the most volatile. They also differ in distributional effects: income taxes are generally considered more progressive than sales taxes. State and local governments must consider competition policy goals when designing their tax structures, making important decisions about neutrality, fairness, and economic impact.
Each state's tax structure includes both the legacy of the past and the ambitions of the present. However, this means that each state's tax code reflects a range of decisions made over decades, often resulting in an overall design that poorly reflects the goals of policymakers. . It may be an exaggeration to require states to adopt tax systems that look as though they were intentionally designed, but a state's tax structure reflects fundamental policy considerations, reflecting implicit goals that the code has pursued for many years. Sometimes it helps to look in the mirror.
Individual income tax, also known as personal income tax, is a type of tax that is imposed on the income or profits earned by individuals or households. The income or profits may come from various sources, such as wages, salaries, investments, or other forms of income. Different jurisdictions may have different rules and rates for individual income tax, depending on the type or characteristics of the taxpayer and the type of income.
One common feature of individual income tax is that it is usually progressive, meaning that the tax rate increases as the taxable income increases. For example, in the U.S., the federal income tax has seven brackets with rates ranging from 10% to 37% for the year 2023. This means that a person who earns more income will pay a higher percentage of their income in taxes than a person who earns less income.
Another common feature of individual income tax is that it allows various deductions and credits that reduce the amount of tax payable. Deductions are expenses that can be subtracted from the taxable income, such as business expenses, mortgage interest, or charitable donations. Credits are amounts that can be subtracted from the tax liability, such as child tax credit, earned income credit, or foreign tax credit. Deductions and credits may vary by jurisdiction and by type of taxpayer.
Individual income tax is different from corporate income tax, which is a type of tax that is imposed on the income or profits earned by corporations or other legal entities. Corporate income tax is usually levied at a flat rate, meaning that the same percentage of tax applies to all levels of income. For example, in the U.S., the federal corporate income tax rate is 21% for the year 2023. Corporate income tax may also have different rules and rates for different types of corporations or activities.
Individual income tax is also different from other types of taxes that may apply to individuals or households, such as sales tax, property tax, payroll tax, or estate tax. These taxes are based on different bases or measures of income, such as consumption, ownership, employment, or inheritance. These taxes may also have different purposes and effects on the economy and society.
Federal excise taxes are indirect taxes imposed on the sale or use of certain goods and services in the United States. They are collected by the Internal Revenue Service (IRS) and often passed on to the consumers in the form of higher prices. Some of the goods and services subject to federal excise taxes include:
- Fuel: Gasoline, diesel, and other motor fuels are taxed at 18.4 cents per gallon for gasoline and 24.4 cents per gallon for diesel. These taxes fund the Highway Trust Fund, which pays for highway and transit projects. The average state tax on fuel is 31.02 cents per gallon for gasoline and 32.66 cents per gallon for diesel.
- Air travel: Passenger air fares, air cargo, and aviation fuel are taxed to support the Airport and Airway Trust Fund, which finances the Federal Aviation Administration (FAA) and airport improvements. The tax rate on domestic passenger tickets is 7.5% of the fare plus $4.30 per segment. The tax rate on international passenger tickets is $18.90 per arrival or departure.
- Health care: The Affordable Care Act (ACA) imposed several excise taxes on health insurers, medical device manufacturers, importers of prescription drugs, and indoor tanning services to help pay for health care reform. Some of these taxes have been repealed or delayed by subsequent legislation.
- Tobacco: Cigarettes, cigars, snuff, chewing tobacco, pipe tobacco, and roll-your-own tobacco are taxed to fund health programs and discourage tobacco use. The tax rate on cigarettes is $1.01 per pack of 20. The tax rate on other tobacco products varies depending on the type and weight of the product.
- Alcohol: Beer, wine, distilled spirits, and hard cider are taxed to raise revenue and reduce alcohol consumption. The tax rate on beer is $18 per barrel (31 gallons). The tax rate on wine ranges from $1.07 to $3.40 per gallon depending on the alcohol content and carbonation level. The tax rate on distilled spirits is $13.50 per proof gallon (a proof gallon is one liquid gallon that is 50% alcohol). The tax rate on hard cider is $0.226 per gallon.
- Firearms and ammunition: Pistols, revolvers, firearms (other than pistols and revolvers), shells, and cartridges are taxed to support wildlife conservation and restoration programs. The tax rate on pistols and revolvers is 10% of the sales price. The tax rate on other firearms and ammunition is 11% of the sales price.
U.S. General Sales and Gross Receipts Taxes
General sales and gross receipts taxes are taxes imposed on the sale of goods and services by state and local governments in the United States. They are usually calculated as a percentage of the price paid by the consumer, and are collected by the seller at the point of sale. The seller then remits the collected tax to the appropriate tax authority.
General sales and gross receipts taxes are different from income taxes, which are levied on the income earned by individuals or businesses. Sales taxes are also different from excise taxes, which are imposed on specific goods or activities, such as gasoline, tobacco, or gambling.
Sales taxes vary widely across states and localities in terms of rates, exemptions, and administration. Some states have a uniform statewide sales tax rate, while others allow local governments to impose additional sales taxes on top of the state rate. Some states exempt certain goods or services from sales tax, such as food, clothing, or prescription drugs. Some states also provide sales tax holidays, which are periods when certain items are exempt from sales tax.
Sales taxes are a major source of revenue for state and local governments in the U.S. According to the U.S. Census Bureau, sales and gross receipts taxes accounted for 23.6% of state tax revenue and 12.5% of local tax revenue in fiscal year 2019. Sales taxes are also considered to be regressive, meaning that they impose a higher burden on low-income households than on high-income households, because low-income households spend a larger share of their income on taxable goods and services.
U.S. individual income taxes are taxes levied by the federal government and some states and localities on the income earned by individuals and households. The federal income tax system is progressive, meaning that tax rates increase with income levels. The federal income tax rates for 2022 range from 10% to 37%, depending on the filing status and taxable income of the taxpayer. In addition to the regular income tax, some individuals may be subject to the alternative minimum tax (AMT), which is a parallel tax system that ensures that high-income taxpayers pay a minimum amount of tax. The federal income tax also applies lower rates to certain types of income, such as qualified dividends and long-term capital gains.
Some states and localities also impose income taxes on individuals and households, either at a graduated or a flat rate. The state and local income tax rates vary widely across the country, and some states do not have an income tax at all. Generally, state and local income taxes are deductible from federal taxable income, subject to certain limitations.
Individuals and households must file an annual income tax return with the Internal Revenue Service (IRS) and their state and local tax authorities, if applicable. The income tax return reports the income, deductions, credits, and taxes of the taxpayer for the previous year. The deadline for filing federal income tax returns is usually April 15 of the following year, unless an extension is granted. Most states and localities follow the same deadline as the federal government.
U.S. property taxes are taxes levied on real estate or personal property by local governments. The amount of property tax is determined by the assessed value of the property and the tax rate set by the taxing authority. Property taxes are one of the main sources of revenue for local governments, and they are used to fund public services such as schools, roads, parks, and police. Property taxes vary widely across the U.S., depending on the state, county, city, and school district. Some states have limits on how much property taxes can increase each year, while others have exemptions or credits for certain types of property owners, such as seniors, veterans, or low-income households. Property taxes can have a significant impact on the affordability and attractiveness of owning or renting a property in a given area.
U.S. sales taxes are taxes imposed by state and local governments on the sale of goods and services. They are collected by the seller at the point of sale and remitted to the respective tax authorities. U.S. sales taxes vary widely by state and locality, ranging from 0% to 13.5%. Some states have a uniform statewide sales tax rate, while others allow local jurisdictions to impose additional sales taxes on top of the state rate. Some states also exempt certain items or categories of items from sales taxation, such as food, clothing, prescription drugs, or services.
U.S. Social Insurance (Payroll) Taxes are taxes that employers and employees pay to fund various programs that provide benefits and services to workers and their families. These programs include Social Security, Medicare, unemployment insurance, and workers' compensation. The taxes are calculated as a percentage of the employee's wages, and are usually withheld from the employee's paycheck by the employer. The employer also pays a matching amount of taxes for each employee. The rates and limits of these taxes vary depending on the type and amount of income, and are subject to change by law.
Payroll taxes are an important source of revenue for the federal and state governments, as well as a way of providing social protection and insurance to workers and their families. However, they also impose a cost on employers and employees, which may affect their decisions regarding hiring, wages, hours, and benefits.
Besides the federal income tax, there are other types of taxes that individuals and businesses in the United States may have to pay. These include state and local sales and use taxes, property taxes, excise taxes, telecommunication taxes and surcharges, business license responsibilities and unclaimed property-reporting requirements.
The majority of state and local tax revenue comes from income, property, and sales taxes, which account for more than four-fifths of the total. However, there are also other types of taxes that contribute to the rest of the revenue. These include excise taxes on specific goods such as motor fuel, tobacco, alcohol, and so on. These taxes are imposed by all states at different rates and are sometimes referred to as "selective sales taxes" because they target certain transactions rather than all of them.
Telecommunication taxes and surcharges are fees imposed by federal, state and local governments on the providers and users of telecommunication services, such as phone, internet and cable. They may include sales taxes, excise taxes, franchise fees, universal service fees and 911 fees. Telecommunication taxes and surcharges are often used to fund public programs such as emergency services, education and health care.
Business license responsibilities are obligations that businesses must fulfill to operate legally in a state or locality. They may include obtaining a license or permit, paying a fee, filing a report or complying with certain regulations. Business license responsibilities vary by industry, location and size of the business.
Unclaimed property-reporting requirements are rules that require businesses to report and remit any property that belongs to another person or entity but has been abandoned or unclaimed for a certain period of time. Examples of unclaimed property include uncashed checks, dormant bank accounts, unclaimed wages, insurance benefits and gift cards. Businesses must report unclaimed property to the state where the owner's last known address is located or where the business is incorporated.
The U.S. Social Security taxes are the taxes that fund the Social Security program, which provides benefits to retired workers, disabled people, and their dependents. The Social Security taxes are collected through two federal laws: the Federal Insurance Contributions Act (FICA) and the Self-Employed Contributions Act (SECA). Both laws require employers and employees to pay a certain percentage of their wages or earnings to the Social Security trust funds. The current tax rate for Social Security is 6.2% for the employer and 6.2% for the employee, or 12.4% total. However, not all income is subject to Social Security taxes. There is a maximum amount of earnings that can be taxed each year, which is adjusted annually for inflation. For 2023, the maximum taxable earnings are $147,000.
Some people may also have to pay income tax on their Social Security benefits, depending on their income level and filing status. The Internal Revenue Service (IRS) has rules to determine how much of the benefits are taxable. Generally, if a person's combined income (adjusted gross income plus nontaxable interest plus half of the Social Security benefits) is above a certain threshold, they may have to pay tax on up to 85% of their benefits . The threshold varies depending on whether the person files as an individual, married filing jointly, or married filing separately. For example, for an individual filer in 2023, the threshold is $25,000 for 50% taxation and $34,000 for 85% taxation .
The Social Security taxes and benefits are important aspects of the U.S. tax system and social welfare program. They affect millions of Americans who contribute to and receive from the program. Therefore, it is essential to understand how they work and how they may impact one's financial situation.
The U.S. Social Security Rate For Companies is a tax that employers pay to the federal government to fund various social programs, such as retirement, disability, and health care benefits. The current rate for this tax is 7.65% of the employee's wages. This rate consists of two components: 6.2% for the Old-Age, Survivors, and Disability Insurance (OASDI) program, also known as Social Security, and 1.45% for the Hospital Insurance (HI) program, also known as Medicare. The OASDI tax has a wage base limit, which means that only the first $160,200 of the employee's wages in 2023 are subject to this tax. The HI tax has no wage base limit, which means that all of the employee's wages are subject to this tax. Additionally, employers are required to withhold an extra 0.9% HI tax from the employee's wages that exceed $200,000 in a calendar year, regardless of their filing status. This is called the Additional Medicare Tax and there is no employer match for it.
The U.S. Social Security Rate For Employees is the percentage of income that employees pay to the Social Security program, which provides benefits to retired and disabled workers and their dependents. The rate is determined by law and may change from year to year.
According to the Internal Revenue Service (IRS), the current tax rate for Social Security is 6.2% for the employer and 6.2% for the employee, or 12.4% total. The current rate for Medicare, which is another social insurance program that covers health care costs for the elderly and disabled, is 1.45% for the employer and 1.45% for the employee, or 2.9% total. The combined rate for Social Security and Medicare is 7.65% for both the employer and the employee, or 15.3% total .
However, these rates are not applied to all earnings. There is a maximum amount of earnings that are subject to Social Security taxes, which is adjusted annually based on changes in the average wage index. For 2021, this amount is $142,800. For 2022, this amount is estimated to be $147,000. For 2023, this amount is estimated to be $160,200. Earnings above these limits are not taxed by Social Security, but they are still subject to Medicare taxes, which have no limit.
The Social Security Rate For Employees affects how much income tax employees pay and how much net income they receive. It also affects how much benefits they can expect to receive from Social Security when they retire or become disabled. The Social Security Administration (SSA) provides online calculators and tools to help employees estimate their future benefits based on their earnings history and projected earnings.
The U.S. withholding tax rate is the percentage of income that the Internal Revenue Service (IRS) requires employers to deduct from employees' wages and remit to the government. The withholding tax rate varies depending on the employee's income level, filing status, number of allowances claimed, and other factors. The withholding tax rate also applies to certain types of income received by nonresident aliens and foreign entities from U.S. sources, such as dividends, interest, royalties, and rents. The withholding tax rate for these types of income is generally 30%, unless a lower rate is specified by a tax treaty between the U.S. and the foreign country.
Each state's tax structure includes both the legacy of the past and the ambitions of the present. However, this means that each state's tax code reflects a range of decisions made over decades, often resulting in an overall design that poorly reflects the goals of policymakers. It may be an exaggeration to require states to adopt tax systems that look as though they were intentionally designed, but a state's tax structure reflects fundamental policy considerations, reflecting implicit goals that the code has pursued for many years. Sometimes it helps to look in the mirror.
A regressive tax is a uniformly applied tax that applies a higher percentage of income to low-income earners than to middle- and high-income earners. This is in contrast to a progressive tax, which charges a higher percentage for high earners. With a regressive tax, the tax burden decreases as income increases.
The regressive tax affects low-income earners more than high-income earners because it applies equally to all situations, no matter who the taxpayer is. While in some cases it may be fair to tax everyone at the same rate, in other cases it is considered unfair. As a result, most income tax systems use a progressive scale in which high earners are taxed at a higher percentage rate than low income earners, while other taxes are applied uniformly. best.
Even though the US has a progressive tax system when it comes to income taxes, meaning that people with higher incomes pay a higher percentage of tax each year than people with lower incomes, we still pay Some fees are considered regressive taxes. Some of these include government sales taxes, user fees, and to some extent property taxes.
A prorated tax is a tax that takes a certain percentage of your income. General taxes increase as income increases, but taxes are the same percentage regardless of income level. Some argue that the US income tax system should be transformed into a single tax system, one that would take the same percentage of income from all taxpayers. Such a tax would be a proportional tax.
Proportional taxation is an income tax system that applies the same percentage of taxes to everyone, regardless of income. The prorated tax is the same for low, middle and high income taxpayers. Proportional taxes are sometimes referred to as flat taxes. In contrast, a progressive or marginal tax system gradually adjusts tax rates based on income. Low-income earners are taxed at a lower rate than high-income earners.
Proportional taxes allow people to be taxed as a percentage of their annual income. Proponents of the proportional tax system suggest that it incentivizes taxpayers to earn more because they are not penalized with a higher tax bracket. In addition, the permanent tax system facilitates registration. Critics of the flat tax argue that the system imposes an unfair burden on low-paid workers in exchange for lower taxes on the wealthy. Critics, however, believe that the progressive tax system is fairer than the fixed tax system.
In some cases, a sales tax can also be considered a prorated tax because all consumers, regardless of income, pay the same fixed rate. Sales tax rates apply to goods and services and the buyer's income is not part of the equation. Other examples include capitalization taxes and fixed payroll deductions under the Federal National Insurance Contributions Act (FICA).
Progressive taxes are taxes that take a higher percentage of your income as your income increases. The federal income tax is an example of a progressive tax. Table 15.1, "Federal Income Tax Rates, 2011," shows the federal income tax rates for different types of married income in 2011. As shown in the table, high-income couples taxed at a higher rate. For example, any income over $379,150 is taxed at 35%
Proportional taxation is an income tax system that applies the same percentage of taxes to everyone, regardless of income. The prorated tax is the same for low, middle and high income taxpayers. Proportional taxes are sometimes referred to as flat taxes.
In contrast, a progressive or marginal tax system gradually adjusts tax rates based on income. Low-income earners are taxed at a lower rate than high-income earners.
Proportional taxes allow people to be taxed as a percentage of their annual income. Proponents of the proportional tax system suggest that it incentivizes taxpayers to earn more because they are not penalized with a higher tax bracket. In addition, the permanent tax system facilitates registration. Critics of the flat tax argue that the system imposes an unfair burden on low-paid workers in exchange for lower taxes on the wealthy. However, critics believe that the progressive tax system is fairer than the fixed tax system.
In some cases, a sales tax can also be considered a prorated tax because all consumers, regardless of income, pay the same fixed rate. Sales tax rates apply to goods and services and the buyer's income is not part of the equation. Other examples include capitalization taxes and fixed payroll deductions under the Federal National Insurance Contributions Act (FICA).