US tax system

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US tax system

  • The US tax system is the principle of taxing one of the undisputed leaders on the world stage. In this blog we will consider not only the US tax system, but also the features of the tax systems of other countries.

The US tax system has 3 levels: federal, state and municipal level.

Of the characteristic features are the following:

  • Federal taxes are progressive in nature, that is, with an increase in the object of taxation, the tax rate grows, “regular” and local taxes can be calculated at a regression rate.
  • Although the US tax system consists of 3 levels, the law does not clearly divide applicable federal, state, and local taxes. Each state has the right to approve its own taxes, it is enough only to comply with legal requirements.
  • Simultaneous taxation of the same taxes by the federal, state, and local governments. For example, the state population can pay 2 types of income and property tax, 3 types of excise tax at different levels of the budget. Companies pay corporation tax at the federal level. In most states, they still have to pay the same tax, but in the state budget.
  • The US tax system is mainly focused on direct taxes. For example, there is no such tax as VAT in the United States, but in almost every state sales tax is obligatory.
  • Not only companies can make payments for social security of employees, but also employees themselves. Most taxes (about 70%) go to the federal budget.

So, as the main taxes adopted in the United States, can be called:

  1. Personal income tax, which serves as the main tax revenue of the federal budget. It is also paid by physical persons who run an individual business.
  2. Property tax for individuals and companies. Corporate tax for companies (Russian equivalent of income tax).
  3. Excise (indirect tax). Sales tax (indirect tax).
  4. Taxes calculated on labor remuneration (social security contributions).
  5. The tax on the elimination of unemployment.
  6. In general, the US tax system provides 30% of the country’s GDP.
  7. The US tax burden is recognized as one of the lowest among industrialized countries.

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