Source: http://www.worldheritage.org/articles/Taxation_in_the_United_States
Timestamp: 2019-04-25 00:19:49+00:00

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The OECD, only Chile and Mexico taxed less as a share of GDP. The United States also has one of the most progressive tax systems in the industrialized world.
Taxes are imposed on net income of individuals and corporations by the federal, most state, and some local governments. Citizens and residents are taxed on worldwide income and allowed a credit for foreign taxes. Income subject to tax is determined under tax accounting rules, not financial accounting principles, and includes almost all income from whatever source. Most business expenses reduce taxable income, though limits apply to a few expenses. Individuals are permitted to reduce taxable income by personal allowances and certain nonbusiness expenses, including home mortgage interest, state and local taxes, charitable contributions, and medical and certain other expenses incurred above certain percentages of income. State rules for determining taxable income often differ from federal rules. Federal tax rates vary from 10% to 39.6% of taxable income. State and local tax rates vary widely by jurisdiction, from 0% to 13.30% of income, and many are graduated. State taxes are generally treated as a deductible expense for federal tax computation. In 2013, the top marginal income tax rate for a high-income California resident would be 52.9%.
The United States is one of two countries in the world that taxes its nonresident citizens on worldwide income, in the same manner and rates as residents; the other is Eritrea. The Court upheld the constitutionality of the payment of such tax in the case of Cook v. Tait, 265 U.S. 47 (1924).
Property taxes are imposed by most local governments and many special purpose authorities based on the fair market value of property. School and other authorities are often separately governed, and impose separate taxes. Property tax is generally imposed only on realty, though some jurisdictions tax some forms of business property. Property tax rules and rates vary widely.
Estate and gift taxes are imposed by the federal and some state governments on the transfer of property inheritance, by will, or by life time donation. Similar to federal income taxes, federal estate and gift taxes are imposed on worldwide property of citizens and residents and allow a credit for foreign taxes.
Fiscal Year 2012 U.S. Federal Receipts.
The United States has an assortment of federal, state, local, and special-purpose governmental jurisdictions. Each imposes taxes to fully or partly fund its operations. These taxes may be imposed on the same income, property or activity, often without offset of one tax against another. The types of tax imposed at each level of government vary, in part due to constitutional restrictions. Income taxes are imposed at the federal and most state levels. Taxes on property are typically imposed only at the local level, though there may be multiple local jurisdictions that tax the same property. Other excise taxes are imposed by the federal and some state governments. Sales taxes are imposed by most states and many local governments. Customs duties or tariffs are only imposed by the federal government. A wide variety of user fees or license fees are also imposed.
A federal wealth tax would be required by the United States Constitution to be distributed to the States according their populations, as this type of tax is considered a direct tax. State and local government property taxes are wealth taxes on real estate.
^ Porter, Eduardo (August 14, 2012). "America’s Aversion to Taxes".
^ "Social policies and data - Organisation for Economic Co-operation and Development". Oecd.org. Retrieved 2013-10-13.
^ "U.S. Taxes Really Are Unusually Progressive - Clive Crook". The Atlantic.
^ Matthews, Dylan (2013-04-05). "America’s taxes are the most progressive in the world. Its government is among the least". Washingtonpost.com. Retrieved 2013-10-13.
^ "TEMPORARY TAXES TO FUND EDUCATION. GUARANTEED LOCAL PUBLIC SAFETY FUNDING. INITIATIVE CONSTITUTIONAL AMENDMENT". Vig.cdn.sos.ca.gov/. 2013-04-05. Retrieved 2013-10-13.
^ NAGOURNEY, ADAM (2013-04-05). "Two-Tax Rise Tests Wealthy in California". NYtimes.com. Retrieved 2013-12-18.
^ Feng, Andrew (2013-07-26). "Who else taxes like the United States?". IRSmedic.com. Retrieved 2013-12-18.
^ "T13-0174 - Average Effective Federal Tax Rates by Filing Status; by Expanded Cash Income Percentile, 2014". Tax Policy Center. Jul 25, 2013. Retrieved 3 November 2013.
^ 26 USC 1 and 26 USC11; IRS Publication 17 and Publication 542.
^ See, e.g., IRS Publication 17, page 45.
^ "U.S. Federal Individual Income Tax Rates History, 1913–2011". Tax Foundation. 9 September 2011.
^ 26 USC 1; IRS [ Publication 17], page 266.
^ a b 26 USC 11; IRS Publication 542.
^ 26 USC 61; IRS Publication 17, Part II.
^ 26 USC 161-249; IRS Publication 17, Publication 501 and Publication 535.
^ 26 USC 446-475; IRS [ Publication ].
^ Coombes, Andrea (2012-04-15). "Taxes—Who Really Is Paying Up - WSJ.com". Online.wsj.com. Retrieved 2013-10-13.
^ 26 USC 161-199; IRS Publication 535.
^ 26 USC ; IRS Publication 17, Chapters 21–28.
^ 26 USC 274; IRS Publication 463.
^ 26 USC 151; IRS Publication 501.
^ 26 USC 63; IRS Publication 501.
^ 26 USC 68; IRS Publication 17, Chapter 29.
^ 26 USC 701; IRS Publication 541.
^ 26 USC 512; IRS Publication 598.
^ 26 USC 332-368; IRS Publication 542.
^ "The American Opportunity Tax Credit". US Department of the Treasury. Retrieved 2012-06-26.
^ 26 USC 6654 and 26 USC 6655; IRS Publication 505.
^ 26 USC 3102 and 26 USC 3402; IRS Publication 15.
^ Carl Davis, Kelly Davis, Matthew Gardner, Robert S. McIntyre, Jeff McLynch, Alla Sapozhnikova, "Who Pays? A Distributional Analysis of the Tax Systems in All 50 States", Institute on Taxation & Economic Policy, Third Edition, November 2009, p. 87.
^ Hellerstein, Jerome H., and Hellerstein, Walter, State and Local Taxation, Cases and Materials, Eighth Edition, 2001 (hereafter "Hellerstein"), page 929.
^ 26 USC 871-898; IRS Publication 515.
^ 26 USC 55-59; IRS Form 6251 instructions.
^ 26 USC 6201(a)(1); IRS [ Publication ].
^ Tax Policy Center (2011-03-23). "Historical Payroll Tax Rates". Taxpolicycenter.org. Retrieved 2013-10-13.
^ "26 USC 3111". Law.cornell.edu. Retrieved 2013-11-15.
^ Carl Davis, Kelly Davis, Matthew Gardner, Robert S. McIntyre, Jeff McLynch, Alla Sapozhnikova, "Who Pays? A Distributional Analysis of the Tax Systems in All 50 States", Institute on Taxation & Economic Policy, Third Edition, November 2009, pp 118.
^ Compare The Illinois Property Tax System (hereafter “IL System”), Louisiana Property Tax Basics (hereafter “La. Basics”),New York pamphlet How Property Tax Works (hereafter “NY Taxworks”), and Texas Property Tax Basics (hereafter “Texas Basics).
^ Fisher, Glen, History of Property Taxes in the United States, 2002.
^ See, e.g., IL System, page 11.
^ Generally, tax assessors send the bills. In Louisiana, however, the parish sheriff is responsible for billing and collection of property tax. See La. Basics, page 2.
^ U.S. Customs and Border Protection booklet (“CBP Booklet”), page 11Importing into the United States.
^ CBP Booklet, page 24.
^ "U.S. Foreign-Trade Zones Board".
^ CBP Booklet, page 151.
^ United States v. Thomas, 788 F.2d 1250, (7th Cir. 1986), cert. denied, 107 S.Ct. 187 (1986); United States v. Benson, 941 F.2d 598, 91-2 U.S. Tax Cas. (CCH) paragr. 50,437 (7th Cir. 1991); Knoblauch v. Commissioner, 749 F.2d 200, 85-1 U.S. Tax. Cas. (CCH) paragr. 9109 (5th Cir. 1984), cert. denied, 474 U.S. 830 (1985); Ficalora v. Commissioner, 751 F.2d 85, 85-1 U.S. Tax Cas. (CCH) paragr. 9103 (2d Cir. 1984); Sisk v. Commissioner; 791 F.2d 58, 86-1 U.S. Tax Cas. (CCH) paragr. 9433 (6th Cir. 1986); United States v. Sitka, 845 F.2d 43, 88-1 U.S. Tax Cas. (CCH) paragr. 9308 (2d Cir.), cert. denied, 488 U.S. 827 (1988); United States v. Stahl, 792 F.2d 1438, 86-2 U.S. Tax Cas. (CCH) paragr. 9518 (9th Cir. 1986), cert. denied, 107 S. Ct. 888 (1987); United States v. House, 617 F. Supp. 237, 87-2 U.S. Tax Cas. (CCH) paragr. 9562 (W.D. Mich. 1985); Ivey v. United States, 76-2 U.S. Tax Cas. (CCH) paragr. 9682 (E.D. Wisc. 1976).
^ Brown v. Commissioner; 53 T.C.M. (CCH) 94, T.C. Memo 1987-78, CCH Dec. 43,696(M) (1987); Lysiak v. Commissioner; 816 F.2d 311, 87-1 U.S. Tax Cas. (CCH) paragr. 9296 (7th Cir. 1987); and Miller v. United States, 868 F.2d 236, 89-1 U.S. Tax Cas. (CCH) paragr. 9184 (7th Cir. 1989). For background on how arguments that the tax laws are unconstitutional may help the prosecution prove willfulness in tax evasion cases, see the United States Supreme Court decision in Cheek v. United States, 498 U.S. 192 (1991) (defendant arguing about constitutionality may be evidence that the defendant was aware of the tax law, and is not a defense to a charge of willfulness).
^ "Tax Gap for Tax Year 2006 Overview Jan. 6, 2012". U.S. Internal Revenue Service. Retrieved 2012-06-14.
^ Tax History Museum covering 1914-1915.
^ Hellerstein, pages 431 and 429.
^ See, e.g., Martin, James W. et al, Tax Exemptions, Tax Policy League, New York, cited in Hellerstein, pp. 1013–1017.
^ The Supreme Court ruled that the federal government is immune from state taxation in McCulloch v. Maryland, 17 US 316 (1819).
Total tax revenue (not adjusted for inflation) for the U.S. federal government from 1980 to 2009 compared to the amount of revenue coming from individual income taxes.
In 1986, Congress adopted, with little modification, a major expansion of the income tax portion of the Internal Revenue Code proposed in 1985 by the U.S. Treasury Department under President Reagan. The thousand page Tax Reform Act of 1986 significantly lowered tax rates, adopted sweeping expansions of international rules, eliminated the lower individual tax rate for capital gains, added significant inventory accounting rules, and made substantial other expansions of the law.
Federal taxes were expanded greatly during World War I. In 1921, wealthy industrialist and then Treasury Secretary Andrew Mellon engineered a series of significant income tax cuts under three presidents. Mellon argued that tax cuts would spur growth. The last such cut in 1928 was followed by the Great Depression in 1929. Taxes were raised again in the latter part of the Depression, and during World War II. Income tax rates were reduced significantly during the Johnson, Nixon, and Reagan Presidencies. Significant tax cuts for corporations and upper income individuals were enacted during the second Bush Presidency.
The federal income tax enacted in 1913 included corporate and individual income taxes. It defined income using language from prior laws, incorporated in the Sixteenth Amendment, as “all income from whatever source derived.” The tax allowed deductions for business expenses, but few non-business deductions. In 1918 the income tax law was expanded to include a Internal Revenue Code. This was reorganized and somewhat expanded in 1954, and remains in the same general form.
U.S. federal government tax receipts as a percentage of GDP from 1945 to 2015 (note that 2010 to 2015 data are estimated).
By 1796, state and local governments in fourteen of the 15 states taxed land. Delaware taxed the income from property. By the American Civil War, the principle of taxation of property at a uniform rate had developed, and many of the states relied on property taxes as a major source of revenue. However, the increasing importance of intangible property, such as corporate stock, caused the states to shift to other forms of taxation in the 1900s.
Under Article VIII of the Articles of Confederation, the United States federal government did not have the power to tax. All such power lay with the states. The United States Constitution, adopted in 1787, authorized the federal government to lay and collect taxes, but required that some types of tax revenues be given to the states in proportion to population. Tariffs were the principal federal tax through the 1800s.
Before 1776, the American Colonies were subject to taxation by the United Kingdom, and also imposed local taxes. Property taxes were imposed in the Colonies as early as 1634. In 1673, the UK Parliament imposed a tax on exports from the American Colonies, and with it created the first tax administration in what would become the United States. Other tariffs and taxes were imposed by Parliament. Most of the colonies and many localities adopted property taxes.
The Internal Revenue Service estimated that in 2001 the tax gap was $345 billion. The tax gap is the difference between the amount of tax legally owed and the amount actually collected by the government. The tax gap in 2006 was estimated to be $450 billion. The tax gap two years later in 2008 was estimated to be in the range of $450–$500 billion and unreported income was estimated to be approximately $2 trillion. Therefore, 18-19 percent of total reportable income was not properly reported to the IRS.
Each major type of tax in the United States has been used by some jurisdiction at some time as a tool of social policy. Both liberals and conservatives have called for more progressive taxes in the U.S.
The distribution of U.S. federal taxes for 2000 as a percentage of income among the family income quintiles.
Tax returns filed with the IRS are subject to examination and adjustment, commonly called an IRS audit. Only a small percentage of returns (about 1% of individual returns in IRS FY 2008) are examined each year. The selection of returns uses a variety of methods based on IRS experiences. On examination, the IRS may request additional information from the taxpayer by mail, in person at IRS local offices, or at the business location of the taxpayer. The taxpayer is entitled to representation by an attorney, CPA, or enrolled agent, at the expense of the taxpayer, who may make representations to the IRS on behalf of the taxpayer.
Taxes in the United States are administered by literally hundreds of tax authorities. At the federal level there are three tax administrations. Most domestic federal taxes are administered by the Internal Revenue Service, which is part of the Department of the Treasury. Alcohol, tobacco, and firearms taxes are administered by the Alcohol and Tobacco Tax and Trade Bureau (TTB). Taxes on imports (customs duties) are administered by U.S. Customs and Border Patrol. TTB is part of the Department of Justice and CBP belongs to the Department of Homeland Security.
The total tax revenue as a percentage of GDP for the U.S. over the past several decades compared to other first world nations.
Fees are often imposed by governments for use of certain facilities or services. Such fees are generally imposed at the time of use. Multi-use permits may be available. For example, fees are imposed for use of national or state parks, rulings from the Internal Revenue Service, use of certain highways (called "tolls" or toll roads), parking on public streets, and use of public transit.
Taxable gifts are certain gifts of U.S. property by nonresident aliens, most gifts of any property by citizens or residents, in excess of an annual exclusion ($13,000 for gifts made in 2011) per donor per donee. Taxable estates are certain U.S. property of nonresident alien decedents, and most property of citizens or residents. For aliens, residence for estate tax purposes is primarily based on domicile, but U.S. citizens are taxed regardless of their country of residence. U.S. real estate and most tangible property in the U.S. are subject to estate and gift tax whether the decedent or donor is resident or nonresident, citizen or alien.
Goods may be imported to the United States subject to import restrictions. Importers of goods may be subject to tax (“customs duty” or “tariff”) on the imported value of the goods. “Imported goods are not legally entered until after the shipment has arrived within the port of entry, delivery of the merchandise has been authorized by CBP, and estimated duties have been paid.” Importation and declaration and payment of customs duties is done by the importer of record, which may be the owner of the goods, the purchaser, or a licensed customs broker. Goods may be stored in a bonded warehouse or a Foreign-Trade Zone in the United States for up to five years without payment of duties. Goods must be declared for entry into the U.S. within 15 days of arrival or prior to leaving a bonded warehouse or foreign trade zone. Many importers participate in a voluntary self-assessment program with CBP. Special rules apply to goods imported by mail. All goods imported into the United States are subject to inspection by CBP. Some goods may be temporarily imported to the United States under a system similar to the ATA Carnet system. Examples include laptop computers used by persons traveling in the U.S. and samples used by salesmen.
The United States imposes tariffs or customs duties on imports of goods. The duty is levied at the time of import and is paid by the importer of record. Customs duties vary by country of origin and product. Goods from many countries are exempt from duty under various trade agreements. Certain types of goods are exempt from duty regardless of source. Customs rules differ from other import restrictions. Failure to properly comply with customs rules can result in seizure of goods and criminal penalties against involved parties. United States Customs and Border Protection (“CBP”) enforces customs rules.
Once value is determined, the assessor typically notifies the last known property owner of the value determination. After values are settled, property tax bills or notices are sent to property owners. Payment times and terms vary widely. If a property owner fails to pay the tax, the taxing jurisdiction has various remedies for collection, in many cases including seizure and sale of the property. Property taxes constitute a lien on the property to which transferes are also subject. Mortgage companies often collect taxes from property owners and remit them on behalf of the owner.
Excise taxes may be imposed on the sales price of goods or on a per unit or other basis. Excise tax may be required to be paid by the manufacturer at wholesale sale, or may be collected from the customer at retail sale. Excise taxes are imposed at the federal and state levels on a variety of goods, including alcohol, tobacco, tires, gasoline, diesel fuel, coal, firearms, telephone service, air transportation, unregistered bonds, and many other goods and services. Some jurisdictions require that tax stamps be affixed to goods to demonstrate payment of the tax.
Federal social insurance taxes are imposed equally on employers and employees, consisting of a tax of 6.2% of wages up to an annual wage maximum ($106,800 in 2010) for Social Security plus a tax of 1.45% of total wages for Medicare. For 2011, the employee's contribution was reduced to 4.2%, while the employer's portion remained at 6.2%. To the extent an employee's portion of the 6.2% tax exceeds the maximum by reason of multiple employers (each of whom will collect up to the annual wage maximum), the employee is entitled to a refundable tax credit upon filing an income tax return for the year.
Historical payroll tax rates for Social Security (blue), Medicare (red) and total (purple). The tax rates shown include both employee and employer contributions.
In the United States, payroll taxes are assessed by the federal government, all fifty states, the District of Columbia, and numerous cities. These taxes are imposed on employers and employees and on various compensation bases. They are collected and paid to the taxing jurisdiction by the employers. Most jurisdictions imposing payroll taxes require reporting quarterly and annually in most cases, and electronic reporting is generally required for all but small employers.
Income taxes in the United States are self-assessed by taxpayers  by filing required tax returns. Taxpayers, as well as certain nontaxpaying entities, like partnerships, must file annual tax returns at the federal and applicable state levels. These returns disclose a complete computation of taxable income under tax principles. Taxpayers compute all income, deductions, and credits themselves, and determine the amount of tax due after applying required prepayments and taxes withheld. Federal and state tax authorities provide preprinted forms that must be used to file tax returns. IRS Form 1040 series of forms is required for individuals, and Form 1120 series of forms for corporations, and Form 1065 for partnerships.
Many states impose minimum income taxes on corporations and/or a tax computed on an alternative tax base. These include taxes based on capital of corporations and alternative measures of income for individuals. Details vary widely by state.
Foreign individuals and corporations not resident in the United States are subject to federal income tax only on income from a U.S. business and certain types of income from withhold federal or state income tax on the payment. Federal withholding of 30% on such income may be reduced under a tax treaty. Such treaties do not apply to state taxes.
State and local taxable income is determined under state law, and often is based on federal taxable income. Most states conform to many federal concepts and definitions, including defining income and business deductions and timing thereof. State rules vary widely with regard to individual itemized deductions. Most states do not allow a deduction for state income taxes for individuals or corporations, and impose tax on certain types of income exempt at the federal level.
43 states and many localities in the United States impose an income tax on individuals. 47 states and many localities impose a tax on the income of corporations. Tax rates vary by state and locality, and may be fixed or graduated. Most rates are the same for all types of income. State and local income taxes are imposed in addition to federal income tax. State income tax is allowed as a deduction in computing federal income tax, subject to limitations for individuals.
A wide variety of tax credits may reduce income tax at the federal and state levels. Some credits are available only to individuals, such as the child tax credit for each dependent child, American Opportunity Tax Credit  for education expenses, or the Earned Income Tax Credit for low income wage earners. Some credits, such as the Work Opportunity Tax Credit, are available to businesses, including various special industry incentives. A few credits, such as the foreign tax credit, are available to all types of taxpayers.
 Corporations owned entirely by U.S. citizens or residents ( By contrast, partnerships are not subject to income tax, but their partners calculate their taxes by including their shares of partnership items. Shareholders are also subject to tax on dividends received from corporations. Corporations must pay tax on their taxable income independently of their shareholders.
The U.S. federal effective corporate tax rate has become much lower than the nominal rate because of tax shelters such as tax havens.
In addition to business expenses, individuals may reduce income by an allowance for personal exemptions  and either a fixed standard deduction or itemized deductions. One personal exemption is allowed per taxpayer, and additional such deductions are allowed for each child or certain other individuals supported by the taxpayer. The standard deduction amount varies by taxpayer filing status. Itemized deductions by individuals include home mortgage interest, property taxes, certain other taxes, contributions to recognized charities, medical expenses in excess of 7.5% of adjusted gross income, and certain other amounts.
Foreign nonresident persons are taxed only on income from U.S. sources or from a U.S. business. Tax on foreign nonresident persons on non-business income is at 30% of the gross income, but reduced under many tax treaties.
Taxable income is gross income  less adjustments and allowable tax deductions. Gross income for federal and most states is receipts and gains from all sources less cost of goods sold. Gross income includes "all income from whatever source," and is not limited to cash received.
Taxable income is gross income less exemptions, deductions, and personal exemptions. Gross income includes "all income from whatever source". Certain income, however, is subject to tax exemption at the federal and/or state levels. This income is reduced by tax deductions including most business and some nonbusiness expenses. Individuals are also allowed a deduction for personal exemptions, a fixed dollar allowance. The allowance of some nonbusiness deductions is phased out at higher income levels.
Taxpayers are required to file tax returns and self assess tax. Tax may be withheld from payments of income (e.g., withholding of tax from wages). To the extent taxes are not covered by withholdings, taxpayers must make estimated tax payments, generally quarterly. Tax returns are subject to review and adjustment by taxing authorities, though far less than all returns are reviewed.
The U.S. income tax system imposes a tax based on income on individuals, corporations, estates, and trusts. The tax is taxable income, as defined, times a specified tax rate. This tax may be reduced by credits, some of which may be refunded if they exceed the tax calculated. Taxable income may differ from income for other purposes (such as for financial reporting). The definition of taxable income for federal purposes is used by many, but far from all states. Income and deductions are recognized under tax rules, and there are variations within the rules among the states. Book and tax income may differ.

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