USA tax system: More than 90 percent of all revenues go to the state budget on average through the US tax system

The United States of America is a country located in North America. It consists of 50 states, a federal district, five major unincorporated territories, nine Minor Outlying Islands, and 326 Indian reservations. It is the third largest country in terms of both area and total area. The United States has land borders with Canada to the north and Mexico to the south. It has maritime borders with the Bahamas, Cuba, Russia and other countries. With a population of over 331 million, it is the third most populous country in the world. The nation's capital is Washington, DC, and the most populous city and financial center is New York.

The US economy is the largest economy in the world in nominal terms, accounting for at least a quarter of global GDP over the past 50 years. This country has a very developed economy and a high level of financial literacy of the population.

Fundamentals of the US tax system

For tax purposes, the United States of America includes the 50 states and the capital, the city of Washington, DC. The United States also exercises sovereign jurisdiction over a number of possessions and territories, including Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands. However, these properties and territories are not subject to US tax laws, nor are they party to or governed by US income tax treaties.

Because the United States is a federal state, income and other taxes are levied at both the federal and state levels, and in some cases by municipalities.

Of the characteristic features of the tax system in the United States, it should be noted, firstly, that the US tax legislation, unlike the Russian one, does not contain a list of federal, regional and local taxes, moreover, the US states have the right to establish any taxes on their territory and this right is limited only by the obligation to comply with the constitutional principles of taxation. Second, there is no value-added tax in the United States, but virtually all states levy a sales tax. Third, companies pay federal corporation tax, but in most cases they also pay state corporation tax. Fourth, the social security tax is paid by both employees and employers. Fifth, the US tax system is more focused on direct taxes, and personal income tax revenues significantly exceed the amount of funds received from corporate tax collection.

More than 90 percent of all revenues go to the state budget on average through the US tax system. The tax burden (the share of total tax revenue in GDP) in the United States is about 30 percent.

The body that administers taxes in the United States is the Internal Revenue Service (IRS), which is the largest structural unit of the US Department of the Treasury.

US tax system

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In the United States, the following main types of taxes are levied:

1. income taxes (personal income tax and corporation tax (i.e. corporate income tax));
2. social security tax (contribution);
3. tax on the liquidation of unemployment;
4. tax on property of legal entities;
5. tax on property passing by way of inheritance or donation;
6. excises;
7. sales tax;
8. environmental protection tax;
9. taxes on the extraction and processing of oil and other minerals;
10. customs duties.

Customs duties are levied only at the federal level. Only state and local governments levy sales and property taxes.

More about US taxes

State legislatures may enact only taxes that do not conflict with federal tax laws, and local governments may levy taxes authorized by state laws. However, in practice, this means that the states have virtually unlimited autonomy in setting taxes, because. The US federal tax legislation, unlike the Russian one, does not contain a list of taxes allowed for introduction in the states. It is this situation that makes the inhabitants of the states show great interest in the election of their governor and parliament, because. their tax burden directly depends on this.

Taxes that generate the largest and most stable revenues go to the federal budget. It accounts for approximately 70% of centralized revenues and expenditures in the country.