A Close Look At Federal Taxes

Before the introduction of taxation in the United States, revenue was sourced through the use of tariffs. The federal taxes were made legal between 1861 and 1862 to fund the civil war. All incomes that were more than $800 were charged three percent of tax and five percent for those people who earned more than ten thousand dollars. The rates were increased in 1864 and revoked in 1872. A different statute was endorsed in 1984. The taxes that had to be paid were on wages and property owned.

At the beginning the rates of tax were determined by the congress but later on, they were determined by inflation. At the moment about two thirds of the people in the United States are expected to pay taxes. Those who earn low incomes do not pay taxes and receive some money from the government to cater for their expenses. When it comes to remitting the Social Security tax to the federal government, there are cases where those who earn less pay more than the people who earn higher incomes. This is because they receive more income replacement once they are in retirement. As a self employed person, you will be required to pay the about 15.3 % of the income you earn as tax. The exception is only made when you are computing your taxable income when filing your returns where you are allowed to deduct one half of the amount to be paid as tax.

The federal government is largely funded by income tax from individuals and corporate organizations. This is unlike the tariffs from the goods that were imported that were originally relied on for revenue. Presently, tariffs only make up a small percentage of the source of revenue. There are various taxes that are collected by the government including income tax, Medicare, Estate taxes, and Security tax. There are also some excise taxes that the government applies to particular things like tires, tobacco, alcoholic beverages motor fuels and use of telephones.

The institution that is in charge of taxes in the United States is the Internal Revenue Service which is an agency of the Treasury. The tax code that is used in the United States is referred to as the Internal Revenue Code that was put in place in 1986. This code was put in place to raise revenue for the federal government and achieve the political, social and economic goals that have been made.

A majority of the federal tax laws are not exactly guided by the rate of inflation. In most cases they do not follow the inflation rate or are guided by the Consumer Price Index which according to some plays down inflation therefore resulting in higher taxes. Currently, the government gets most of the federal taxes from the estate and gift tax, individual income tax, corporate tax and payroll tax. Most of the US citizens pay more payroll tax compared to the income tax. The corporate tax paid by the organizations mainly burdens the customers and the employees who are not wealthy in most cases.

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