US income tax
A tax which is levied on the financial income generated by a person or a corporation by way of holding business or services is called as an income tax. The United States of America is a Federal Constitutional Republic State, which comprises fifty states and a federal district. In the United States an income tax is imposed on individuals, trusts, corporations and certain real estate firms. This tax is imposed on the incomes like earning through wages, gaining on the disposition of real estate properties and the earnings through business. During the war of 1812, the income tax was first imposed in the United States.
There after the income tax laws were enacted from time to time and in 1894 the final Income Tax Act was constitutionally founded. In 1913 the 16th amendment in Income Tax Act was ratified amidst the strong protests and arguments by the business community. In the United States, there are two types of income taxes that are levied, like an Individual state levy income tax in addition to the income tax levied by the Federal State. Not all states levy an income tax and for the Federal Tax purposes, most local and state taxes are deductible tax expenses.
Present income tax rates in the United States:
Currently individual federal tax rates are ranging between 10% to 35% depending on the financial status of the families and the income. For the people with very low income category need not pay any income tax, in this country. They may receive an earned tax benefit called as Earned income credits. Majority of the working people in this country pay their taxes in their pay rolls itself than the income taxes. In this country, around 5% wealthiest people pay nearly 60% of all the income taxes, and the other 50% low category people pay roughly 3% of the total income taxes.
Features of United States income tax process:
As per some critics the present income tax system is very complicated, owing to the fact that it needs a lot of work sheets and forms, which consists of very lengthy instructions and also this system requires detailed record-keeping. This system stalls all other works which affects the competitiveness of all sorts of businesses. The entire system discourages people to make investments and savings. From the companies point of view this tax system consists embodied tax component into products, which harms their exports.
While preparing Income Tax Act the United States Congress has typically shown more preference for lowering the tax rate on the capital gains for long term investments then the ordinary income tax rate. However the capital gains of short term investment are taxed at the same rate as that of an ordinary income tax rate. There are separate tax rates for the income generated by certain real estates. Also, there are different tax rates for the income gains from the small business stocks and the collectibles. In the taxation system of United States, the word tax rate is basically referred to as the marginal tax rate of the ordinary income.
Other Articles
