United States taxation
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| United States taxation | |
|---|---|
| Name | United States taxation |
| Caption | Seal of the Department of the Treasury |
| Jurisdiction | United States |
| Established | 1789 |
| Website | Department of the Treasury |
United States taxation describes the system of levies, statutes, institutions, and practices by which public revenue is raised in the United States. It encompasses historical developments from the Revenue Act of 1861 through the Internal Revenue Code administered by the Internal Revenue Service. Key actors include the United States Congress, the United States Department of the Treasury, state treasuries, and courts such as the United States Supreme Court.
History of taxation in the United States
From colonial levies under the Stamp Act 1765 and responses like the Boston Tea Party to Revolutionary funding under the Continental Congress, taxation has been central to fiscal capacity. Early federal financing relied on tariffs and excise duties established by figures like Alexander Hamilton and debated in the First Bank of the United States era, leading to conflicts involving Thomas Jefferson and James Madison. The Revenue Act of 1861 and wartime measures under Abraham Lincoln introduced income taxation, later challenged in Pollock v. Farmers' Loan & Trust Co. and resolved by the Sixteenth Amendment to the United States Constitution. The New Deal era and post-World War II expansions, including the Internal Revenue Code of 1954 and reforms such as the Tax Reform Act of 1986 championed by Ronald Reagan and influenced by policymakers like Lawrence Summers and Felix Frankfurter, reshaped rates and deductions. Recent milestones include the Economic Growth and Tax Relief Reconciliation Act of 2001, the Tax Cuts and Jobs Act of 2017 enacted during the Donald Trump administration, and ongoing litigation before the United States Court of Appeals for the Federal Circuit and the Supreme Court of the United States.
Federal tax system
The federal system is codified in the Internal Revenue Code and administered by the Internal Revenue Service within the United States Department of the Treasury. Major revenues derive from individual income taxes, payroll taxes for programs such as Social Security (United States) and Medicare (United States), and corporate income taxes imposed on entities like multinational firms regulated under treaties such as the Tax Convention between the United States and the United Kingdom. Tax law interacts with statutes including the Internal Revenue Code of 1986 and regulatory actions from the Treasury Department (United States) and the United States Department of Labor. Judicial review occurs in venues including the United States Tax Court, the United States District Courts, and the Supreme Court of the United States. Budgetary debates in the United States Congress—notably the House Committee on Ways and Means and the Senate Committee on Finance—shape rate structures and credits like the Earned Income Tax Credit.
State and local taxation
State and local revenue systems vary across the fifty states, with distinct approaches in jurisdictions such as California, Texas, New York (state), and Florida. States rely on combinations of personal income taxes, sales taxes administered under laws like the Sales tax in the United States, and property taxes often determined by local entities such as county assessors and municipal treasuries. Intergovernmental issues involve the Interstate Commerce Clause, the Dillon Rule, and compacts like the Multistate Tax Commission, while landmark disputes have reached the Supreme Court of the United States in cases involving Daimler AG-related jurisdictional principles and Quill Corp. v. North Dakota's predecessor doctrines. Cities such as Chicago, Los Angeles, and New York City levy local taxes and fees that affect public finance and municipal bond markets.
Types of taxes
Major categories include individual income taxes, corporate income taxes, payroll taxes for programs such as Social Security (United States) and Medicare (United States), consumption taxes such as sales and excise duties on goods like alcohol and tobacco regulated by statutes including the Internal Revenue Code, and property taxes administered by counties and municipalities. Specialized levies include estate and gift taxes governed by provisions inspired by the Revenue Act of 1924, tariffs under the Tariff Act of 1930, and environmental or sin taxes aligned with policies from agencies like the Environmental Protection Agency. Credits and deductions—examples include the Child Tax Credit and mortgage interest deduction shaped by interest rate priorities articulated by the Federal Reserve System—alter effective tax burdens for households and corporations such as General Electric and ExxonMobil.
Tax administration and enforcement
Administration rests with the Internal Revenue Service enforcing compliance through audits, liens, and criminal referral to the United States Department of Justice for cases prosecuted in federal courts. Regulatory guidance emerges from the Treasury Department (United States) and the Office of Management and Budget; interpretive disputes are adjudicated in the United States Tax Court and appellate courts including the United States Court of Appeals for the Federal Circuit. Enforcement challenges include tax gap estimation by the Congressional Budget Office, international compliance through instruments like the Foreign Account Tax Compliance Act and treaties with jurisdictions such as Switzerland and Luxembourg, and controversies involving tax shelters promoted by accounting firms like Ernst & Young and law firms scrutinized in hearings before United States House Committee on Oversight and Reform.
Tax policy, reform, and controversies
Debates over progressivity, efficiency, and distribution involve scholars and policymakers from institutions such as the Brookings Institution, the Tax Policy Center, and the American Enterprise Institute. High-profile controversies include corporate base erosion discussions concerning firms like Apple Inc. and Google LLC, litigation over state nexus after South Dakota v. Wayfair, Inc., and partisan disputes over rate cuts in laws pushed by Donald Trump and opposed by members of the Democratic Party (United States). Reform proposals range from flat tax plans advocated by figures like Steve Forbes to value-added tax proposals debated in Congress and think tanks including the Cato Institute. Ongoing policy scrutiny engages the Congressional Budget Office, the Government Accountability Office, and international organizations such as the Organisation for Economic Co-operation and Development regarding base erosion and profit shifting.