Taxes in the United States can be levied by both the national government and individual states. National taxes, also known as federal taxes, are imposed by the federal government and apply to all citizens and businesses within the country. State taxes are imposed by individual states and vary depending on the state’s laws and regulations. Some states have no income tax, while others have progressive income tax rates. Sales taxes are also common at the state level, with rates varying by state. Additionally, states may impose property taxes, excise taxes, and other types of taxes. The distribution of tax authority between the national government and states is determined by the U.S. Constitution, which grants the federal government the power to tax and collect revenue for the general welfare, while also reserving certain taxing powers to the states.
Taxes in the United States
Taxes in the United States are collected at both the federal and state levels. The federal government collects income tax, payroll tax, and excise tax. State governments collect income tax, sales tax, and property tax.
Federal Income Tax
- The federal income tax is a tax on the income of individuals and businesses.
- The tax is calculated on the taxpayer’s taxable income, which is the taxpayer’s total income minus certain deductions and exemptions.
- The federal income tax is a progressive tax, which means that the tax rate increases as the taxpayer’s income increases.
- The federal income tax is collected by the Internal Revenue Service (IRS).
| Tax Bracket | Tax Rate |
|---|---|
| 0 to $9,950 | 10% |
| $9,951 to $40,525 | 12% |
| $40,526 to $86,375 | 22% |
| $86,376 to $164,925 | 24% |
| $164,926 to $209,425 | 32% |
| $209,426 to $523,600 | 35% |
| $523,601 or more | 37% |
Local Property Tax
Local property tax is a tax levied by local governments on the value of real estate within their jurisdiction. Property taxes are used to fund a variety of local government services, such as schools, roads, and police and fire protection.
Property taxes are typically assessed by the local government’s tax assessor, who determines the value of the property based on its size, location, and other factors. The property tax rate is then applied to the assessed value to determine the amount of taxes owed.
Property taxes can be a significant expense for homeowners, and they can vary significantly from one jurisdiction to another. In some areas, property taxes are relatively low, while in others they can be quite high.
Factors that affect property taxes
- The value of your property
- The property tax rate in your jurisdiction
- The number of exemptions and deductions you qualify for
How to reduce your property taxes
- File for a homestead exemption
- Claim any other exemptions and deductions you qualify for
- Appeal your property tax assessment if you believe it is inaccurate
- Shop around for a lower property tax rate
Table of average property tax rates by state
| State | Average property tax rate |
|---|---|
| Alabama | 0.55% |
| Alaska | 1.10% |
| Arizona | 0.63% |
| Arkansas | 0.48% |
| California | 0.74% |
Excise Taxes
Excise taxes are imposed on the sale, manufacture, or consumption of specific goods and services. These taxes are typically levied at the federal level, but some states also impose excise taxes on certain items. Common examples of excise taxes include:
- Federal excise taxes on alcohol, tobacco, and fuel
- State excise taxes on gasoline, cigarettes, and sugary drinks
Excise taxes can be structured in different ways, such as:
- Ad valorem taxes: Taxed as a percentage of the value of the good or service.
- Specific taxes: Taxed at a fixed rate per unit of measure (e.g., gallon of gasoline).
- Gross receipts taxes: Taxed on the total revenue generated from the sale of a good or service.
| Item | Federal Excise Tax Rate | Common State Excise Tax Rates |
|---|---|---|
| Alcohol | 14.5% | Varies by state, typically around 5-10% |
| Tobacco | $1.01 per pack of 20 cigarettes | Varies by state, typically around $1-3 per pack |
| Gasoline | 18.4 cents per gallon | Varies by state, typically around 20-40 cents per gallon |
Thanks for checking out this article about where taxes come from! I hope it helped clear up any confusion you might have had. Just remember, when it comes to taxes, the government always gets their cut, no matter where you live. Be sure to check back later for more informative articles like this one. Until next time, keep your wallets open and your tax returns accurate!