The United States government earned $3 trillion in revenue in the year 2014 and this amount is expected to increase this year. Federal tax revenue increased from $2.7 trillion in 2013 and is expected to increase another 9% in 2015 to approximately $3.2 trillion as per an announcement made by the Congressional budget office. It is interesting to note that individual income tax forms the largest component of the revenue of the US government, followed by social insurance tax and then sales tax. There is also an income tax levied on companies big and small. There are two types of income taxes – federal income tax and state income taxes. Federal income tax can amount to anywhere between 10% and 40% of a person’s income depending on the income. Currently, 43 states in the US levy a tax on individual income, 47 states that impose a tax on corporations and 45 states that impose sales tax.
Highest and lowest state income taxes
The state of California imposes the highest amount of tax on individuals levying a hefty 12.3% on the wealthy people earning over $1 million. On the other hand South Carolina is the lowest where the tax is 0% for the first $2,850 of a person’s income. At the same time, nine US states do not impose any income tax. These are Alaska, Nevada, Florida, Texas, South Dakota, Wyoming and Washington. In New Hampshire and Tennessee tax is levied only on interest earned and dividends from stocks and bonds. Eight states which are Colorado, Indiana, Illinois, Michigan, Massachusetts, Pennsylvania, North Carolina and Utah have a flat State Income Taxes rate.
Out of the state taxing salaries, 8 of them have a tax structure of single rate where one rate applies to all assessable earnings while other states charge graduated rate income tax where the amount of brackets varies by state. Kansas as well as Maine inflicts two rate revenue taxes whereas 3 states have 10 brackets or above. A few states gather a huge amount of brackets within narrow revenue band. The approach of the states to income tax varies in other factors as well. A few states charge double tax on married filers and index tax brackets, exceptions, and deflation or increase in price, whereas many do not. Some states combine their typical deductions along with individual exceptions to the federal tax system but others do not. They prefer to fix their own rules or opt for nothing at all.
The same applies to state income taxes levied on organizations. The different states have different rules and regulations for the same. However, most states offer tax deductions on fixed assets and contributions made to the public good. At the same time, some types of investments made by both organisations and individuals are also given some relief in taxes. If you are an individual or an organization who wishes to understand the taxation laws of the federal government as well as the state government it is best to approach a taxation specialist. Of course you can also get some pertinent information regarding the same on the internet, but for detailed information you have to rely on a professional.