Federal tax
A true tax, the supreme court of the United States has held, is an extraction for revenue, that is, revenue collected for the support of the government. A true tax is, therefore, distinguishable from other types of exactions, example: fines, regulatory exactions and service charges, in that it\'s primary purpose is the production of revenue to help the government meet its obligation to provide for the general welfare and common defense of the people and to pay the national debts.
Even an exaction or tax that has no purpose other than revenue is, however, bound to have additional effects. Every tax is a burden on the subject of the tax, whether that subject is property, income, any right or privilege or the tax payer personally. The tax on real property, for example, has forced the razing of many old and un rentable structures on which some tax would otherwise have had to be paid. It is the purpose not the effect that determines the character of the exaction. If the purpose is primarily revenue or if revenue is at least one of the real and substantial purposes, the exaction is properly called tax.
II. Intoduction of federal tax
Federal, state and local government receipts now amount to almost one-third of the gross national product. They come from a variety of taxes, as well as from fees, charges and other miscellaneous sources. The taxes cover almost the entire spectrum: incomes taxes, general and selective consumption taxes, payroll taxes, estate and gift taxes and property taxes.
III. Features of the U.S. tax system
The most distinctive feature of the U.S. tax system is that it places great weight on individual and corporation income taxes. These account for 42 percent of the total revenues of all levels of government. At the federal level they account for 55 percent.
A second feature is the growth in importance of payroll taxes, which were introduced in the 1930s when the social insurance programs were enacted. These taxes now produce over a third of federal revenues and over a fifth of total government revenues in the United States.
A third feature is the federal nature of the revenue system the national and state governments have independent taxing powers, while local governments derive their taxing powers from the state governments. There is duplication among the tax sources of the three governmental levels, especially between the federal government and state governments, but the tax structures differ markedly. The federal government relies primarily on income taxes, the states on consumption taxes and the localities on real property taxes.
Sixty-three percent of all government receipts go to the federal government, but state and local receipts have been rising rapidly in recent decades because demand for state and local services has been growing. Although all governments finance most of their revenue needs from their own sources, there is a well developed system of inter governmental assistance that transfers funds from higher to lower levels of government. Federal grants have been declining in recent years and at least part of these revenues is being replaced by state and local sources.
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