Tax Relief and Health Care Act of 2006
The Tax Relief and Health Care Act of 2006, includes a package of tax extenders, provisions affecting health savings accounts and other provisions in the United States. The Act retroactively extended for two years certain provisions that had expired at the end of 2005, including: Above the line deduction for qualified tuition and higher education expenses Elective itemized deduction for state and local general sales taxes Research credit For tax years ending after December 31, 2006, the Act modifies the rules for calculating the research credit: it increases the rates of the alternative incremental credit and creates a new alternative simplified credit Work opportunity tax credit, welfare-to-work tax credit Tax credit for Qualified Zone Academy Bonds Up to $250 above-the-line deduction for certain expenses of elementary and secondary school teachers Expensing of brownfields remediation costs Tax incentives for investment in Washington, DC Indian employment tax credit Accelerated depreciation for business property on Indian reservations Fifteen-year depreciation for qualified leasehold improvements and qualified restaurant property Enhanced charitable deductions—for corporate donations of scientific property used for research, of computer technology and equipment Archer medical savings accounts Suspension of the taxable income limit on percentage depletion for oil and natural gas produced from marginal propertiesIn addition, the Act extended certain provisions that would otherwise expire at the end of 2006, including: Election to treat combat pay as earned income for purposes of calculating the earned income credit Provisions affecting IRS disclosure of certain tax return informationThe Act extended the new markets tax credit through the end of 2008 and requires that future regulations ensure that non-metropolitan counties receive a proportional allocation of qualified entity investments.
The Act extended through December 31, 2008, numerous energy provisions that would otherwise have expired at the end of 2007, including: Tax credit for electricity produced from certain renewable resources Authority to issue clean renewable energy bonds Deduction for energy-efficient commercial buildings Tax credit for new energy-efficient homes Tax credit for residential energy-efficient property Several provisions affect health savings accounts, including provisions dealing with limitations on HSA contributions and tax-free rollovers to HSAs from health reimbursement accounts, flexible spending accounts and individual retirement accounts. Other provisions include: Expansion of the Section 199 domestic production activity deduction to income from Puerto Rico, if all Puerto Rican receipts are subject to federal income tax A refundable credit of 20 percent of the long-term unused alternative minimum tax credits per year for the next five years, subject to certain limitations and phaseouts Enhancing reporting requirements for the exercise of incentive stock options and employee stock purchase plans Reform and expansion of whistleblower awards to certain individuals who provide information regarding violations of the tax laws An increase of the penalty for frivolous tax submissions from $500 to $5,000 and an extension of the scope of the penalty A temporary itemized deduction for qualified mortgage insurance premiums accrued during 2007, subject to limitations and phase-out Increased information sharing between the IRS and certain regional governmental organizations Charitable remainder trusts having unrelated business taxable income are subjected to an excise tax equal to 100% of unrelated business taxable income A technical correction to the Subpart F look-through rule under the Tax Increase Prevention and Reconciliation Act of 2005 Clarifying that the Tax Court has jurisdiction to review requests for equitable innocent spouse relief Expanding the Medicare Recovery Audit Contractor program to all 50 states and making it permanent Ordering the completion without delay of the All-American Canal Lining Project and identifying a 1944 treaty between the US and Mexico as the exclusive authority concerning the impacts of projects constructed within US territory on foreign territoriesThe Act makes permanent certain provisions that were included as temporary provisions in the Tax Increase Prevention and Reconciliation Act of 2005 and were otherwise scheduled to expire after 2010, including: Federal income tax exemption of certain qualified settlement funds established to resolve CERCLA claims "Separate affiliated group" rule for satisfaction of active trade or business requirement under Section 355 Election to treat self-created musical works as capital assets Exemption from imputed interest rules for certain loans to qualified continuing care facilities CRS Report in the public domain H.
R. 6111, Legislative History
Economic Growth and Tax Relief Reconciliation Act of 2001
The Economic Growth and Tax Relief Reconciliation Act of 2001 was a major piece of tax legislation passed by the 107th United States Congress and signed by President George W. Bush, it is known by its abbreviation EGTRRA, is referred to as one of the two "Bush tax cuts". Bush had made tax cuts the centerpiece of his campaign in the 2000 presidential election, he introduced a major tax cut proposal shortly after taking office. Though a handful of Democrats supported the bill, most support came from congressional Republicans; the bill was passed by Congress in May 2001, signed into law by Bush on June 7, 2001. Due to the narrow Republican majority in the United State Senate, EGGTRA was passed using the reconciliation process, which bypasses the Senate filibuster. EGGTRA lowered federal income tax rates, reducing the top tax rate from 39.6 percent to 35 percent and reducing rates for several other tax brackets. The act reduced capital gain taxes, raised raised pre-tax contribution limits for defined contribution plans and Individual Retirement Accounts, eliminated the estate tax.
In 2003, Bush signed another bill, the Jobs and Growth Tax Relief Reconciliation Act of 2003, which contained further tax cuts and accelerated certain tax changes that were part of EGGTRA. Due to the rules concerning reconciliation, EGGTRA contained a sunset provision that would end the tax cuts in 2011, but most of the cuts were made permanent with the passage of the American Taxpayer Relief Act of 2012. Bush's promise to cut taxes was the centerpiece of his 2000 presidential campaign, upon taking office, he made tax cuts his first major legislative priority. A budget surplus had developed during the Bill Clinton administration, with the Federal Reserve Chairman Alan Greenspan's support, Bush argued that the best use of the surplus was to lower taxes. By the time Bush took office, reduced economic growth had led to less robust federal budgetary projections, but Bush maintained that tax cuts were necessary to boost economic growth. After Treasury Secretary Paul O'Neill expressed concerns over the tax cut's size and the possibility of future deficits, Vice President Cheney took charge of writing the bill, which the administration proposed to Congress in March 2001.
Bush sought a $1.6 trillion tax cut over a ten-year period, but settled for a $1.35 trillion tax cut. The administration rejected the idea of "triggers" that would phase out the tax reductions should the government again run deficits; the Economic Growth and Tax Relief Reconciliation Act won the support of congressional Republicans and a minority of congressional Democrats, Bush signed it into law in June 2001. The narrow Republican majority in the Senate necessitated the use of the reconciliation, which in turn necessitated that the tax cuts would phase out in 2011 barring further legislative action. One of the most notable characteristics of EGTRRA is that its provisions were designed to sunset on January 1, 2011 (that is, for tax years, plan years, limitation years that begin after December 31, 2010. After a two-year extension by the Tax Relief, Unemployment Insurance Reauthorization, Job Creation Act of 2010, the Bush era rates for taxpayers making less than $400,000 per year were made permanent by the American Taxpayer Relief Act of 2012.
The sunset provision allowed EGTRRA to sidestep the Byrd Rule, a Senate rule that amends the Congressional Budget Act to allow Senators to block a piece of legislation if it purports a significant increase in the federal deficit beyond ten years. The sunset allowed the bill to stay within the letter of the PAYGO law while removing nearly $700 billion from amounts that would have triggered PAYGO sequestration. In addition to the tax cuts implemented by the EGTRRA, it initiated a series of rebates for all taxpayers that filed a tax return for 2000; the rebate was up to a maximum of $300 for single filers with no dependents, $500 for single parents, $600 for married couples. Anybody who paid less than their maximum rebate amount in net taxes received that amount, meaning some people who did not pay any taxes did not receive rebates; the rebates were automatic for anybody who filed their 2000 tax return on time, or filed for an extension and sent a return. If an eligible person did not receive a rebate check by December 2001 they could apply for the rebate in their 2001 tax return.
EGTRRA reduced the rates of individual income taxes: a new 10% bracket was created for single filers with taxable income up to $6,000, joint filers up to $12,000, heads of households up to $10,000. The 15% bracket's lower threshold was indexed to the new 10% bracket the 28% bracket would be lowered to 25% by 2006; the 31% bracket would be lowered to 28% by 2006 the 36% bracket would be lowered to 33% by 2006 the 39.6% bracket would be lowered to 35% by 2006The EGTRRA in many cases lowered the taxes on married couples filing jointly by increasing the standard deduction for joint filers to between 164% and 200% of the deduction for single filers. Additionally, EGTRRA increased the per-child tax credit and the amount eligible for credit spent on dependent child care, phased out limits on itemized deductions and personal exemptions for higher income taxpayers, increased the exemption for the Alternative Minimum Tax, created a new depreciation deduction for qualified property owners; the capital gains tax on qualified gains of property or stock held for five years was reduced from 10% to 8% for those in the 15% income tax bracket.
EGTRRA introduced sweeping changes to retirement plans, incorporating many of the so-called Portman-Cardin provisions proposed by those House members i
Public Law 110-343
Public Law 110-343 is a US Act of Congress signed into law by U. S. President George W. Bush, designed to mitigate the growing financial crisis of the late-2000s by giving relief to so-called "Troubled Assets."Its formal title is "An Act To provide authority for the Federal Government to purchase and insure certain types of troubled assets for the purposes of providing stability to and preventing disruption in the economy and financial system and protecting taxpayers, to amend the Internal Revenue Code of 1986 to provide incentives for energy production and conservation, to extend certain expiring provisions, to provide individual income tax relief, for other purposes." The Act created a $700 billion Troubled Asset Relief Program under the Emergency Economic Stabilization Act of 2008, enacted the Energy Improvement and Extension Act of 2008, Tax Extenders and Alternative Minimum Tax Relief Act of 2008, which included the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008, the Heartland Disaster Tax Relief Act of 2008.
The first version of the Emergency Economic Stabilization Act of 2008 was rejected by the House of Representatives on September 29. After its defeat, Senate leaders decided to amend an existing bill from the House in order to circumvent the revenue origination clause of U. S. Constitution, chose H. R. 1424 as the vehicle for the legislation. H. R. 1424 was sponsored by United States House Representative Patrick J. Kennedy. On September 30, 2008, Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell announced the proposed draft had been formalized for the amendment that would transform H. R. 1424 into the Senate version of the Emergency Economic Stabilization Act of 2008. On October 1, 2008, the amendment to H. R. 1424 was approved by a vote of 74 to 25, the entire amended bill was passed by 74 to 25. The bill was returned to the House for consideration. On October 3, 2008, the bill as passed by the Senate was accepted by a vote of 263 to 171 in the House; every member of the House voted, though the House had a vacant seat of the deceased Stephanie Tubbs Jones of Ohio.
President George W. Bush signed the bill into law a few hours later; the Emergency Economic Stabilization Act of 2008 is part of an effort to bail out firms holding mortgage-backed securities in an attempt to restore liquidity to the credit markets. The Energy Improvement and Extension Act of 2008 contains a new tax credit for plug-in hybrid electric vehicles for less than a year after the first 250,000 are sold; the credit is a base $2,500 plus $417 for each kWh of battery pack capacity in excess of 4 kWh to a maximum of $15,000 for any vehicle with a gross vehicle weight rating of more than 26,000 pounds and up to $7,500 for 12 kWh or more in passenger cars. It extends existing tax credits for renewable energy initiatives, including cellulosic ethanol and biodiesel development, wind, solar and hydro-electric power, it establishes electricity as a clean-burning fuel for tax purposes. Separately, this section requires the reporting of cost basis by brokers to the IRS for certain securities acquired after 2011 – see covered security.
The Tax Extenders and Alternative Minimum Tax Relief Act includes $100 billion in tax breaks for businesses and the middle class, plus a provision to raise the cap on federal deposit insurance from $100,000 to $250,000. The Act keeps the alternative minimum tax from hitting 20 million middle-income Americans, it provides $8 billion in tax relief for those hit by natural disasters in the Midwest and Louisiana. As a whole, the Senate tax package would cost $150.5 billion over 10 years. $43.5 billion would be offset by several revenue-raising provisions. Hedge fund managers would be forbidden from using offshore corporations to defer paying taxes; the bill freezes a tax deduction that oil and gas companies get for certain domestic production activities. The deduction, now 6 percent, is scheduled to rise to 9 percent in 2010; the provisions of the tax bill included: A temporary increase in Federal Deposit Insurance Corporation deposit insurance limit from $100,000 to $250,000 until December 2009 Tax breaks for businesses Tax credits for the use of alternative energy and plug-in hybrids Tax credits for research and development Expansion of the child tax credit Protection from the Alternative Minimum Tax Tax reductions for victims of severe weather Extension of unemployment insurance A USD $1,000 tax credit for low income homeowners Tax breaks and credit extensions for the following: "Certain wooden arrows designed for use by children" Wool research Film and television productions Litigants in the 1989 Exxon-Valdez oil spill Virgin Island and Puerto Rican rum American Samoa Mine rescue teams Mine safety equipment Domestic production activities in Puerto Rico Indian tribes Railroads Auto racing tracks District of Columbia The Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 mandates that if U.
S. health insurance companies provide coverage for mental health and substance abuse, the coverage must be equal for conditions such as psychological disorders and drug addiction. This act continues and expands upon the previous Mental Health Parity Act of 1996, it states that financial requirements such as deductibles and copayments and lifetime or dollar limits t
Economic Recovery Tax Act of 1981
The Economic Recovery Tax Act of 1981 known as the ERTA or "Kemp–Roth Tax Cut", was a federal law enacted by the 97th United States Congress and signed into law by President Ronald Reagan. The act was a major tax cut designed to encourage economic growth. Republican Congressman Jack Kemp and Republican Senator William Roth had nearly won passage of a tax cut during the presidency of Jimmy Carter, Reagan made a major tax cut his top priority upon taking office. Though Democrats maintained a majority in the House of Representatives during the 97th Congress, Reagan was able to convince conservative Democrats like Phil Gramm to support the bill. ERTA passed Congress on August 4, 1981, was signed into law on August 13, 1981. ERTA was one of the largest tax cuts in U. S. history, ERTA and the Tax Reform Act of 1986 are known together as the Reagan tax cuts. Along with spending cuts, Reagan's tax cuts were the centerpiece of what some contemporaries described as the conservative "Reagan Revolution."
Included in the act was an across-the-board decrease in federal income tax rates. The top marginal tax rate fell from 70 percent to 50 percent, the bottom rate dropped from 14 percent to 11 percent. To prevent future bracket creep, the new tax rates were indexed for inflation. ERTA slashed estate taxes, capital gains taxes, corporate taxes. Critics of the act claim that it worsened federal budget deficits, while supporters credit it for bolstering the economy during the 1980s. Due to deficit concerns in the midst of the early 1980s recession, many of the cuts implemented by ERTA were rescinded by the Tax Equity and Fiscal Responsibility Act of 1982; the Office of Tax Analysis of the United States Department of the Treasury summarized the tax changes as follows: phased-in 23% cut in individual tax rates over 3 years. The maximum expense in calculating credit was increased from $2000 to $2400 for one child and from $4000 to $4800 for two or more kids; the credit increased from a maximum of $400 or $800 to 30 % of $10,000 income or less.
The 30% credit is diminished by 1% for every $2,000 of earned income up to $28000. At $28000, the credit for earned income is 20%; the amount a married taxpayer who files a join return increased under the Economic Recovery Tax Act to $125,000 from $100,000, allowed under the 1976 Act. A single person is limited to an exclusion of $62,500, it increases the amount of a one time exclusion of gain realized on the sale of principal residence by a persons at least 55 years old. Republican Congressman Jack Kemp and Republican Senator William Roth had nearly won passage of a major tax cut during the presidency of Jimmy Carter, but President Carter had prevented passage of the bill due to concerns about the deficit. Supply-side economics advocates like Kemp and Reagan asserted that cutting taxes would lead to higher government revenue due to economic growth, a proposition, challenged by many economists. Upon taking office, Reagan made the passage of Kemp-Roth bill his top domestic priority; as Democrats controlled the House of Representatives, passage of any bill would require the support of some House Democrats in addition to the support of congressional Republicans.
Reagan's victory in the 1980 presidential campaign had united Republicans around his leadership, while conservative Democrats like Phil Gramm of Texas were eager to back some of Reagan's conservative policies. Throughout 1981, Reagan met with members of Congress, focusing on winning support from conservative Southern Democrats. In July 1981, the Senate voted 89-11 in favor of the tax cut bill favored by Reagan, the House subsequently approved the bill in a 238-195 vote. Reagan's success in passing a major tax bill and cutting the federal budget was hailed as the "Reagan Revolution" by some reporters; the Accelerated Cost Recovery System was a major component of the ERTA and was amended in 1986 to become the Modified Accelerated cost Recovery System. The system changed the way. Instead of basing the depreciation deduction on an estimate of the expected useful life of assets, the assets were placed into categories: 3, 5, 10, or 15 years of life. For example, the agriculture industry saw a re-evaluation of their farming assets.
Items such as automobiles and swine were given 3 year depreciation values, things like buildings and land had a 15-year depreciation value. The idea was that there would be a rise in tax cuts due to the optimistic consideration of depreciating values; this would in turn put more cash into the pockets of business owners to promote investment and economic growth. The most lasting impact and significant change of the Act was the indexing of the tax code parameters for inflation starting in years after 1984. Of the nine federal tax laws between 1968 and this Act, si
Tax Reform Act of 1986
The U. S. Congress passed the Tax Reform Act of 1986 to simplify the income tax code, broaden the tax base and eliminate many tax shelters. Referred to as the second of the two "Reagan tax cuts", the bill was officially sponsored by Democrats, Richard Gephardt of Missouri in the House of Representatives and Bill Bradley of New Jersey in the Senate; the Tax Reform Act of 1986 was given impetus by a detailed tax-simplification proposal from President Reagan's Treasury Department, was designed to be tax-revenue neutral because Reagan stated that he would veto any bill, not. Revenue neutrality was achieved by offsetting tax cuts for individuals by eliminating $60 billion annually in tax loopholes and shifting $24 billion of the tax burden from individuals to corporations by eliminating the investment tax credit, slowing depreciation of assets, enacting a stiff alternative minimum tax on corporations; the top tax rate for individuals for tax year 1987 was lowered from 50% to 38.5%. Many lower level tax brackets were consolidated, the upper income level of the bottom rate was increased from $5,720/year to $29,750/year.
This package consolidated tax brackets from fifteen levels of income to four levels of income. The standard deduction, personal exemption, earned income credit were expanded, resulting in the removal of six million poor Americans from the income tax roll and a reduction of income tax liability across all income levels; the higher standard deduction simplified the preparation of tax returns for many individuals. For tax year 1987, the Act provided a graduated rate structure of 11%/15%/28%/35%/38.5%. Beginning with tax year 1988, the Act provided a nominal rate structure of 15%/28%/33%. However, beginning with 1988, taxpayers having taxable income higher than a certain level were taxed at an effective rate of about 28%; this was jettisoned in the Omnibus Budget Reconciliation Act of 1990, otherwise known as the "Bush tax increase", which violated his Taxpayer Protection Pledge. The Act increased incentives favoring investment in owner-occupied housing relative to rental housing. Prior to the Act, all personal interest was deductible.
Subsequently, only home mortgage interest was deductible, including interest on home equity loans. The Act phased out many investment incentives for rental housing, through extending the depreciation period of rental property to 27.5 years from 15-19 years. It discouraged real estate investing by eliminating the deduction for passive losses. To the extent that low-income people may be more to live in rental housing than in owner-occupied housing, this provision of the Act could have had the tendency to decrease the new supply of housing accessible to low-income people; the Low-Income Housing Tax Credit was added to the Act to provide some balance and encourage investment in multifamily housing for the poor. Moreover, interest on consumer loans such as credit card debt was no longer deductible. An existing provision in the tax code, called Income Averaging, which reduced taxes for those only making a much higher salary than before, was eliminated; the Act, increased the personal exemption and standard deduction.
The Individual Retirement Account deduction was restricted. The IRA had been created as part of the Employee Retirement Income Security Act of 1974, where employees not covered by a pension plan could contribute the lesser of $1500 or 15% of earned income; the Economic Recovery Tax Act of 1981 removed the pension plan clause and raised the contribution limit to the lesser of $2000 or 100% of earned income. The 1986 Tax Reform Act retained the $2000 contribution limit, but restricted the deductibility for households that have pension plan coverage and have moderate to high incomes. Non-deductible contributions were allowed. Depreciation deductions were curtailed. Prior to ERTA, depreciation was based on "useful life" calculations provided by the Treasury Department. ERTA set up the "accelerated cost recovery system"; this set up a series of useful lives based on three years for technical equipment, five years for non-technical office equipment, ten years for industrial equipment, fifteen years for real property.
TRA86 lengthened these lives, lengthened them further for taxpayers covered by the alternative minimum tax. These latter, longer lives approximate "economic depreciation," a concept economists have used to determine the actual life of an asset relative to its economic value. Defined contribution pension contributions were curtailed; the law prior to TRA86 was that DC pension limits were the lesser of 25% of compensation or $30,000. This could be accomplished by any combination of elective deferrals and profit sharing contributions. TRA86 introduced an elective deferral limit of $7000, indexed to inflation. Since the profit sharing percentage must be uniform for all employees, this had the intended result of making more equitable contributions to 401's and other types of DC pension plans; the 1986 Tax Reform Act introduced the General Nondiscrimination rules which applied to qualified pension plans and 403 plans that for private sector employers. It did not allow such pension plans to discriminate in favor of compensated employees.
A compensated employee for the purposes of testing a plan's compliance for the 2006 plan year is any employee whose compensation exceeded $95,000 in the 2005 plan year. Therefore, all new hires are by definition nonhighly compensated employees. A plan could not give benefits or contributions on a more favorable basis for
United States Reports
The United States Reports are the official record of the rulings, case tables, in alphabetical order both by the name of the petitioner and by the name of the respondent, other proceedings of the Supreme Court of the United States. United States Reports, once printed and bound, are the final version of court opinions and cannot be changed. Opinions of the court in each case are prepended with a headnote prepared by the Reporter of Decisions, any concurring or dissenting opinions are published sequentially; the Court's Publication Office oversees the binding and publication of the volumes of United States Reports, although the actual printing and publication are performed by private firms under contract with the United States Government Publishing Office. For lawyers, citations to United States Reports are the standard reference for Supreme Court decisions. Following The Bluebook, a accepted citation protocol, the case Brown, et al. v. Board of Education of Topeka, for example, would be cited as: Brown v. Bd. of Educ.
347 U. S. 483. This citation indicates that the decision of the Court in the case entitled Brown v. Board of Education, as abbreviated in Bluebook style, was decided in 1954 and can be found in volume 347 of the United States Reports starting on page 483; the early volumes of the United States Reports were published by the individual Supreme Court Reporters. As was the practice in England, the reports were designated by the names of the reporters who compiled them: Dallas's Reports, Cranch's Reports, etc; the decisions appearing in the entire first volume and most of the second volume of United States Reports are not decisions of the United States Supreme Court. Instead, they are decisions from various Pennsylvania courts, dating from the colonial period and the first decade after Independence. Alexander Dallas, a lawyer and journalist, of Philadelphia, had been in the business of reporting these cases for newspapers and periodicals, he subsequently began compiling his case reports in a bound volume, which he called Reports of cases ruled and adjudged in the courts of Pennsylvania and since the Revolution.
This would come to be known as the first volume of Dallas Reports. When the United States Supreme Court, along with the rest of the new Federal Government moved, in 1791, from New York City to the nation's temporary capital in Philadelphia, Dallas was appointed the Supreme Court's first unofficial, unpaid, Supreme Court Reporter. Dallas continued to publish Pennsylvania decisions in a second volume of his Reports; when the Supreme Court began hearing cases, he added those cases to his reports, starting towards the end of the second volume, 2 Dallas Reports, with West v. Barnes. Dallas went on to publish a total of four volumes of decisions during his tenure as Reporter; when the Supreme Court moved to Washington, D. C. in 1800, Dallas remained in Philadelphia, William Cranch took over as unofficial reporter of decisions. In 1817, Congress made the Reporter of Decisions an official, salaried position, although the publication of the Reports remained a private enterprise for the reporter's personal gain.
The reports themselves were the subject of an early copyright case, Wheaton v. Peters, in which former reporter Henry Wheaton sued current reporter Richard Peters for reprinting cases from Wheaton's Reports in abridged form. In 1874, the U. S. government began creating the United States Reports. The earlier, private reports were retroactively numbered volumes 1–90 of the United States Reports, starting from the first volume of Dallas Reports. Therefore, decisions appearing in these early reports have dual citation forms: one for the volume number of the United States Reports. For example, the complete citation to McCulloch v. Maryland is 17 U. S. 316. Reporter of Decisions of the Supreme Court of the United States Lists of United States Supreme Court cases by volume National Reporter System United States Supreme Court: Information About Opinions United States Supreme Court: Bound Volumes – Lists of PDFs Torrents of United States Reports 502–550
Taxation in the United States
The United States of America has separate federal and local governments with taxes imposed at each of these levels. Taxes are levied on income, property, capital gains, imports and gifts, as well as various fees. In 2010, taxes collected by federal and municipal governments amounted to 24.8% of GDP. In the OECD, only Chile and Mexico are taxed less as a share of their GDP. However, taxes fall much more on labor income than on capital income. Divergent taxes and subsidies for different forms of income and spending can constitute a form of indirect taxation of some activities over others. For example, individual spending on higher education can be said to be "taxed" at a high rate, compared to other forms of personal expenditure which are formally recognized as investments. Taxes are imposed on net income of individuals and corporations by the federal, most state, some local governments. Citizens and residents are allowed a credit for foreign taxes. Income subject to tax is determined under tax accounting rules, not financial accounting principles, includes all income from whatever source.
Most business expenses reduce taxable income. Individuals are permitted to reduce taxable income by personal allowances and certain non-business expenses, including home mortgage interest and local taxes, charitable contributions, medical and certain other expenses incurred above certain percentages of income. State rules for determining taxable income differ from federal rules. Federal marginal tax rates vary from 10% to 39.6% of taxable income. State and local tax rates vary by jurisdiction, from 0% to 13.30% of income, many are graduated. State taxes are treated as a deductible expense for federal tax computation, although the 2017 tax law imposed a $10,000 limit on the state and local tax deduction, which raised the effective tax rate on medium and high earners in high tax states. Prior to the SALT deduction limit, the average deduction exceeded $10,000 in most of the Midwest, exceeded $11,000 in most of the Northeastern United States, as well as California and Oregon; the states impacted the most by the limit were California.
The United States is one of two countries in the world that taxes its non-resident citizens on worldwide income, in the same manner and rates as residents. The U. S. Supreme Court upheld the constitutionality of imposition of such a tax in the case of Cook v. Tait. Payroll taxes are imposed by the federal and all state governments; these include Social Security and Medicare taxes imposed on both employers and employees, at a combined rate of 15.3%. Social Security tax applies only to the first $106,800 of wages in 2009 through 2011. However, benefits are only accrued on the first $106,800 of wages. Employers must withhold income taxes on wages. An unemployment tax and certain other levies apply to employers. Payroll taxes have increased as a share of federal revenue since the 1950s, while corporate income taxes have fallen as a share of revenue.. Property taxes are imposed by most local governments and many special purpose authorities based on the fair market value of property. School and other authorities are separately governed, impose separate taxes.
Property tax is imposed only on realty, though some jurisdictions tax some forms of business property. Property tax rules and rates vary with annual median rates ranging from 0.2% to 1.9% of a property's value depending on the state. Sales taxes are imposed by most states and some localities on the price at retail sale of many goods and some services. Sales tax rates vary among jurisdictions, from 0% to 16%, may vary within a jurisdiction based on the particular goods or services taxed. Sales tax is collected by the seller at the time of sale, or remitted as use tax by buyers of taxable items who did not pay sales tax; the United States imposes tariffs or customs duties on the import of many types of goods from many jurisdictions. These tariffs or duties must be paid before the goods can be imported. Rates of duty vary from 0 % based on the particular goods and country of origin. Estate and gift taxes are imposed by the federal and some state governments on the transfer of property inheritance, by will, or by lifetime donation.
Similar to federal income taxes, federal estate and gift taxes are imposed on worldwide property of citizens and residents and allow a credit for foreign taxes. The U. S. has an assortment of federal, state and special-purpose governmental jurisdictions. Each imposes taxes to or fund its operations; these taxes may be imposed on the same income, property or activity without offset of one tax against another. The types of tax imposed at each level of government vary, in part due to constitutional restrictions. Income taxes are imposed at most state levels. Taxes on property are imposed only at the local level, although there may be multiple local jurisdictions that tax the same property. Other excise taxes are imposed by the federal and some state governments. Sales taxes are imposed by many local governments. Customs duties or tariffs are only imposed by the federal government. A wide variety of user fees or license fees are imposed. A federal wealth tax would be required by the U. S. Constitution to be distributed to the States according to their populations, as this type of tax is considered a direct tax.
State and local government property taxes are w