The word Tax is an adjective that has many different meanings depending on the context. Generally, when used in the United States of America it refers to the administrative or civil tax law. In Canada, the taxation legislation is called the taxation system. Taxation in most developed countries is based on the principle of taxation according to ability to produce surplus income. The tax concept is very similar to the theory of taxation, as money is produced out of the production of goods and services. A tax therefore is a periodic financial burden or any kind of levy placed on a taxpayer by some governmental agency in order to finance various public needs and government spending.
Taxation is a tax on income or wealth. The taxation system of some countries, like the United States of America, is based on a progressive scale where higher incomes have greater taxation than lower incomes. This system is progressive because the principle of taxation is to increase income at a faster rate than existing earnings, and with it the taxation burden grows proportionately with increasing income. On the other hand, in other countries like Canada and Australia, the taxation system is based on a proportional system which means the same rate of taxation is levied on everyone equally. In Canada, transfers of funds are exempt from income tax, unlike the case in the United States.
A tax on income is levied by the federal government, state governments and sometimes municipalities as well. A general tax is levied by the United States federal government. In the United States, the tax system is mostly progressive, with some states devoting a lower percentage of income earned by people to capital gains, dividends and some personal exemptions. Federal income taxes also include the tax on dividends. In addition to these, there are several other taxes levied by both the state governments and the federal government. These include estate and gift taxes, property taxes, personal possessions taxes, sales taxes, gambling taxes and carbon taxes.
When people hear the word “tax,” they usually think of income or payroll taxes. These taxes can be divided into two categories: income taxes and payroll taxes. In the United States, payroll taxes are mostly levied by the employer. If you are self-employed or work through an independent company, your share in the payroll taxes are taken by your company. However, some states do allow some employers to withhold these taxes themselves.
The second category is called capital gains taxes. Capital gains taxes are levied when someone sells his/her asset for a higher price than the price he paid for it. In most cases, this amount is subject to a certain percentage being above a specified limit. Some examples of assets that are subject to capital gains taxes : shares in the stock market, bonds, mutual funds, money market accounts and automobile depreciation items. When you buy or sell certain assets, the sale proceeds are subject to capital gains taxes.
As a conclusion, the tax law for the United States will continue to evolve with the changing economic conditions. For example, some local tax policy changes have already been announced. To see the full list of changes, visit a local library or view the Minnesota Tax Laws portal.