Taxation in the USA Research

Document Type:Research Paper

Subject Area:Accounting

Document 1

Each state has developed their tax system different from one another as an effort to assist in making the appropriate charges. As a result, the separation of the institutions on the matter complicates the tax system in the US. The federal system faces particular challenges in that it does raise enough revenue that can assist the government in undertaking all the necessary operations (Torgler, 2012). The government spending in most cases comes from the taxes collected, and thus the lack of revenue results in the slowing of the appropriate activities as the government determines better ways to deal with the situation. Tax Progressivity A good tax system can raise enough capital to support the activities of the government. In the evaluation of the tax system, it is essential to establish the distribution of the payments made as well as the revenue generated in the operations (McGee, 2011).

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The method in use by the US government may result in the provision of tax that has a much less economic impact on the nation. In such instances, the marginal propensity to consume decreases as the level of income increases. High tax rates may hurt the society, therefore, reducing the productivity levels as well as limiting the risks that the entrepreneurs tend to undertake on a daily basis. Federal Income Taxes It is the most complicated form of taxation in the US and was established in 1913 through the ratification of the constitution. For itemized deductions, it is the amount that tends to exceed the standardized deductions. Calculation of exemptions takes place under the tax filers that put in place and thus allowing the government to determine the process of undertaking the computation.

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Subtracting the deductions and exemptions from the adjustable gross income results to the provision of the taxable income (Kitao, 2011). Calculation of the effective tax rate based on the total income as well as the AGI. The individuals with high incomes in most cases have the exemption allowance eliminated and thus reducing the amount paid. 9% tax represents the funding for Medicare program, and both employer and employees contribute similarly. For self-employed individuals, they are responsible for making the total payments. For social security tax, only the first $127,200 is taxable while any amount above it is not taxable. For medicine tax, payments made on all the wages. Therefore, when the amount exceeds $127,200 the tax in question tends to become regressive. The ‘Tax Cuts and Jobs Act of 2017’ resulted in the changes in the corporate tax rate from 35% to 21% valid from Jan 2018.

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To make the necessary calculations, one has to determine the total taxable income for the company to make the required computations. Corporations usually tend to face a dilemma with regards to double taxation. The income earned is taxed to the company after the earning takes place and then to the shareholders during the process of issuing the dividends. If the incorporations distribute the profits, the shareholders must report the income on the personal tax returns. Such taxes are also made on activities for instances on-highway trucks. For the tanning service, a 10% excise act is a requirement for the ACA. The IRS regulates the payment of the required taxes and ensures that the necessary regulations are put in place to support the activities of the federal government.

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Therefore, it is vital to make the essential considerations in such occasions. Federal Estate and Gift Taxes These types of taxes apply to the wealthy Americans and therefore do not affect a large percentage of the Americans. The framework advocates the wealthy to pass along the beneficiaries without the payment of any taxes along the way (Ebeling, 2018). The reform only benefits the wealthy people since they can issue gifts and still not pay any taxes along the way. It is essential for the appropriate regulations to be put in place to assist in the improvement of the operations of the federal government. Conclusion The taxation system in the USA comprises of various levels that are crucial in support of the operations of both the state and federal governments.

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