Taxation in the United States

Uncommon card · No. 187974

The United States has separate federal, state, and local governments with taxes imposed at each of these levels. Taxes are levied on income, payroll, property, sales, capital gains, dividends, imports, estates and gifts, as well as various fees. In 2020, taxes collected by federal, state, and local governments amounted to 25.5% of GDP, below the OECD average of 33.5% of GDP. U.S. tax and transfer policies are progressive and therefore reduce effective income inequality, as rates of tax generally increase as taxable income increases. As a group, the lowest earning workers, especially those with dependents, pay no income taxes and may actually receive a small subsidy from the federal government (from child credits and the earned income tax credit). Taxes fall much more heavily on labor income than on capital income. Divergent taxes and subsidies for different forms of income and spending can also constitute a form of indirect taxation of some activities over others. Taxes are imposed on net...

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