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| income tax (United States) | |
|---|---|
| Name | Federal individual income tax (United States) |
| Type | Direct tax |
| Jurisdiction | United States |
| Introduced | 1913 (Sixteenth Amendment ratified) |
| Administering authority | Internal Revenue Service |
| Law | Sixteenth Amendment to the United States Constitution, Internal Revenue Code |
income tax (United States) is the federal levy on individual and corporate income in the United States. Enacted after ratification of the Sixteenth Amendment to the United States Constitution, it is administered by the Internal Revenue Service under the Internal Revenue Code. The tax funds programs enacted by the United States Congress and appropriated by the President of the United States.
The modern system traces to the Sixteenth Amendment to the United States Constitution and the enactment of the Revenue Act of 1913, following earlier measures such as the Revenue Act of 1861 and Revenue Act of 1894 that intersected with decisions by the United States Supreme Court, notably Pollock v. Farmers' Loan & Trust Co.. World events shaped rates and structure: the World War I financing needs led to the Revenue Act of 1916, while the Revenue Act of 1942 and World War II introduced withholding; postwar policy debates involved FairTax proposals and reforms under administrations of Franklin D. Roosevelt, Woodrow Wilson, Dwight D. Eisenhower, Lyndon B. Johnson, Richard Nixon, Ronald Reagan, and Barack Obama. Landmark code reorganizations include the Internal Revenue Code codified in 1954 and amended in 1986 by the Tax Reform Act of 1986, with major changes under the Tax Cuts and Jobs Act of 2017 during the administration of Donald Trump.
Authority derives from the Sixteenth Amendment to the United States Constitution and statutes passed by the United States Congress, codified in the Internal Revenue Code. The Internal Revenue Service enforces provisions and issues guidance, influenced by decisions of the United States Tax Court, United States Court of Federal Claims, and the United States Court of Appeals for the Federal Circuit, with ultimate review by the United States Supreme Court. Administrative practice is shaped by acts such as the Budget and Accounting Act of 1921, Tax Reform Act of 1986, and regulations from the Treasury Department (United States). Tax treaties negotiated by the United States Department of State with countries like United Kingdom, Canada, and Germany affect cross-border taxation, alongside conventions like the Organisation for Economic Co-operation and Development model rules influencing international tax policy debated in forums with European Union counterparts.
Taxable income calculations follow definitions in the Internal Revenue Code, distinguishing gross income items from exclusions recognized in cases like Commissioner v. Glenshaw Glass Co. Progressive rates have been applied since the early twentieth century; statutory brackets and marginal rates were altered by the Revenue Act of 1913, Revenue Act of 1924, Tax Reform Act of 1986, and the Tax Cuts and Jobs Act of 2017. Corporate rates and individual rates diverged following reforms under the Revenue Act of 1936 and later changes under administrations including Bill Clinton and George W. Bush. Alternative Minimum Tax rules, originating in the Tax Reform Act of 1969, operate alongside ordinary rates and have been adjusted by subsequent laws such as the American Taxpayer Relief Act of 2012. Definitions of capital gains, dividends, and ordinary income implicate cases like Commissioner v. LoBue and statutes affecting entities such as S corporations and partnerships.
The code provides mechanisms to reduce tax liability: credits such as the Earned Income Tax Credit established under Tax Reform Act of 1975 and expanded in legislation associated with Bill Clinton and George W. Bush; education-related credits under the Taxpayer Relief Act of 1997 enacted during Bill Clinton; and energy credits debated in acts like the Energy Policy Act of 2005. Deductions include itemized deductions under sections shaped by the Tax Reform Act of 1986 and the standard deduction changes under the Tax Cuts and Jobs Act of 2017. Personal exemptions were affected by legislation and court interpretation, with policy disputes involving figures such as Alice Rivlin and commissions like the U.S. Advisory Panel on Federal Tax Reform. Interaction with state taxes implicates jurisdictions like California, New York (state), and Texas and administrative entities such as the California Franchise Tax Board.
Filing procedures are regulated by the Internal Revenue Service with forms such as Form 1040, Form W-2, and Form 1099 required by deadlines enforced by statutes and guidance from the Treasury Department (United States). Withholding systems implemented during World War II rely on employer obligations codified in the Current Tax Payment Act of 1943. Enforcement tools include audits, liens, levies, and litigation in tribunals like the United States Tax Court; prominent enforcement actions have involved institutions such as Goldman Sachs and individuals litigating rights in cases before the Supreme Court of the United States. Administrative penalties, interest rules, and collection policies are governed by the Internal Revenue Manual and affected by oversight from the Government Accountability Office and congressional committees such as the United States House Committee on Ways and Means.
Debates over progressivity, efficiency, and equity engage scholars from Harvard University, Massachusetts Institute of Technology, University of Chicago, and policy organizations like the Brookings Institution and American Enterprise Institute. Controversies include tax avoidance strategies practiced by multinational firms such as Apple Inc., Google LLC, and Amazon.com, Inc.; evasion cases involving figures like Al Capone historically; and public disputes over audits of organizations including Tea Party groups. Legislation like the Tax Cuts and Jobs Act of 2017 prompted analysis by Congressional Budget Office and Joint Committee on Taxation regarding deficits and distributional effects. Ongoing reform proposals range from flat tax plans promoted by Milton Friedman-influenced advocates to consumption-tax proposals like FairTax and comprehensive proposals discussed in commissions including the Simpson–Bowles Commission.