Free Tax Law Facts
Learn About Tax Law And
How It Applies To You

The federal government is now financed primarily by personal and corporate income taxes. While it was originally funded via tariffs upon imported goods, tariffs now represent only a minor portion of federal income. There are also non-tax fees to recompense agencies for services or to fill specific trust funds such as the fee placed upon airline tickets for airport expansion and air traffic control. Often the receipts intended to be placed "trust" funds are used for other purposes, with the government posting an IOU ('I owe you') in the form of a federal bond or other accounting instrument, then spending the money on unrelated current expenditures. 

The federal government collects income, estate (death) and other taxes.  City and state taxes often derive from property taxes, sales taxes and income taxation revenue as their primary funds generation methods.  Federal income tax laws are so complicated it is wise to use the services of a professional in the preparation of the related tax forms.

The federal government collects several specific taxes in addition to the general income tax. Social Security and Medicare are large social support programs which are funded by taxes on personal earned income. Estate taxes are taxes on inheritance. Net long-term capital gains, including certain types of qualified dividend income, are taxed preferentially.

Federal excise taxes are applied to specific items such as motor fuels, tires, telephone usage, tobacco products, and alcoholic beverages. Excise taxes are often, but not always, allocated to special funds related to the object or activity taxed.

Local government is typically financed by value-based property taxes, mainly on real estate. Additional taxes may be in the form of fixed sales taxes. Local government fees such as building permit fees may reflect the added capital cost and operating costs of services such as schools and parks. Local governments may also collect fines (parking and traffic tickets). income tax, gross receipts or gross payroll tax, or a portion of sales taxes (such as meal taxes) collected by the state. In California, seeds, bulbs, starter plants and trees obtained from a garden center are taxed if adjudged for decorative purposes while plants for food production are untaxed, as is food in California.

While its main intent is to provide revenue for the federal government, the tax code is frequently used to direct the behavior of businesses and individuals in an attempt to achieve social, economic, and political goals. For example, the tax law provides a deduction for mortgage interest in order to encourage home ownership. A theoretically pure income tax would not allow this deduction, which is not an expense incurred for the production of income. The allowance of the mortgage interest deduction is seen by some as discrimination against taxpayers who rent, rather than own, their home: the payment of rent for one's home is not deductible. Of course in theory, landlords generate tax savings on their mortgage interest payments, and pass these savings on to renters.

Because the government uses the tax code as an instrument of social policy, the code as a whole appears to lack a coherent organizing principle. This lack of a coherent organizing principle has become magnified over time, due to the interplay between successive legislative amendments and regulatory changes to the law and the private sector responses to those amendments and changes. For instance, suppose that Congress enacts a tax credit to encourage a particular type of activity. In response, a group of taxpayers who are not the intended beneficiaries of the credit re-order their affairs, or the superficial aspects of their affairs, to qualify for the credit. Congress responds by amending the code to add restrictions and target the credit more effectively. Certain taxpayers manage to use this change to claim additional benefits, so Congress acts again, and so on. The result is a feedback loop of enactment and response, which, over an extended period of time, produces significant complexity.

In general, the U.S. income tax is highly progressive, at least with respect to individuals that earn wage income. As of 2001, the top 1 percent of individual taxpayers paid approximately 23 percent of all federal taxes. The top 5 percent paid approximately 39 percent, and the top 10 percent paid 50 percent of all federal taxes. The bottom 20 percent of taxpayers paid a little over 1 percent of all federal taxes. Moreover, the progressivism of the U.S. tax system has gradually increased over recent decades. The top 20 percent of taxpayers paid approximately 56 percent of all taxes in 1980, and this figure gradually has risen to 65 percent, as of 2001. In recent years, however, a reduction in the tax rates applicable to capital gains has significantly reduced the income tax burden on non-wage income. In this regard, the general structure of the U.S. tax system has begun to resemble a partial consumption-tax regime.

Taxation Best Sellers from Amazon.com

FairTax: The Truth: Answering the Critics
by Neal Boortz, John Linder
Amazon Price: $10.17
Customer Review: This book will answer critics and give you even more comfort about The FairTax. It answers legitimate objections, dispels stupid garbage, and overcomes opponents of The FairTax who have a vested interest in keeping our present outdated, unconstitutio...

The Retirement Savings Time Bomb . . . and How to Defuse It: A Five-Step Acti...
by Ed Slott
Amazon Price: $11.20
Customer Review: Its hard to believe that you can spend your entire working life providing for your family and saving money to support yourself in retirement only to lose most of your retirement assets to the IRS when you die. Ed Slott's recent book provides strategi...

The Only Investment Guide You'll Ever Need
by Andrew Tobias
Amazon Price: $11.20
Customer Review: I'll admit it. I'm pretty much a cynic. I've read a few finance books, and they often make me feel more daunted. Everyone comes across as all-knowing, that their advice is the best. The thing that makes this book different than many of the others, is...

Rich Dad's Real Estate Advantages: Tax and Legal Secrets of Successful Real E...
by Sharon L. Lechter, Garrett Sutton
Amazon Price: $12.23
Customer Review: I bought my first property just before I purchased this book. I received it just before an international business trip, and didn't get any sleep on the flight because I was pouring over the basic concepts and ideas that fill this wonderful book.

The Fair Tax Book: Saying Goodbye to the Income Tax and the IRS
by Neal Boortz, John Linder
Amazon Price: $10.17
Customer Review: I have read this book, and the second book also.

I have long thought that a consumption based tax system would be much more fair for all Americans and here is a book explaining a proposal currently (and repeatedly) before Congress. For ...


Newsfeed display by CaRP

Taxation News

• Nigeria: Ican Amendment Bill Seeks Control Of Accounting, Taxation Bodies All...
The Institute of Chartered Accountants of Nigeria ICAN is seeking through legislation to subsume other accounting and taxation bodies in the country.
• Holding Period Concept For CGT Likely: India And UK Tax Models Under Study Bu...
ISLAMABAD May 18 2008: The government is actively examining taxation models of India and United Kingdom UK for introducing the concept of holding period time period for possible imposition of capital gain tax CGT on sales of listed securities from fiscal year 2008 09.
• Tanzania: Mining Firms Targeted AllAfrica.com
The Government plans to review its taxation structure in this years national Budget to get especially the mining companies to pay more, the Finance minister says.
• Parking Charge System Medieval BBC News
Local authorities use of incorrect traffic fines is close to theft a Tory peer tells the BBC.
• Torrent Power Standalone Q4 Standalone Net Up 14 Despite OneTime Provision Na...
RTTNews Torrent Power Ltd., one of the leading brands in the Indian power sector, announced financial results for the fourth quarter ended March 31, 2008, reporting a higher standalone net profit, despite one time expense towards excess provision for taxation of earlier years.

IMPORTANT NOTICE: The information provided by FactsOfLaw.com does not constitute legal advice or any other type of advice and is provided for educational purposes only without warranty of any kind. FactsOfLaw.com has not reviewed the information on this page for accuracy and is not responsible for any errors, omissions or inaccuracies.  For legal advice you should consult a licensed attorney. Source: wikipedia.org