Progressive tax

progressiveprogressive taxationprogressive income tax
The opposite of a progressive tax is a regressive tax, where the average tax rate or burden decreases as an individual's ability to pay increases. The term is frequently applied in reference to personal income taxes, in which people with lower income pay a lower percentage of that income in tax than do those with higher income. It can also apply to adjustments of the tax base by using tax exemptions, tax credits, or selective taxation that creates progressive distribution effects.

Taxable income

exemptionincomeIRC §63
In addition, many systems only levy taxes on earnings above an income tax threshold, allow deductions for personal allowances or a minimum deemed amount of personal deductions. The United States federal tax system allows a deduction for personal exemptions, as well as a minimum standard deduction in lieu of other personal deductions. Some states in the United States allow few personal deductions. Income tax. Income tax in Canada. Income tax in Hong Kong. Income tax in the United Kingdom. Income tax in the United States. Taxable wages.

Tithe

tithestithingtenth
Members of state churches pay a church tax of between 1% and 2% of income, depending on the municipality. In addition, 2.55 per cent of corporate taxes are distributed to the state churches. Church taxes are integrated into the common national taxation system. Germany levies a church tax, on all persons declaring themselves to be Christians, of roughly 8–9% of their income tax, which is effectively (very much depending on the social and financial situation) typically between 0.2% and 1.5% of the total income. The proceeds are shared among Catholic, Lutheran, and other Protestant Churches.

Tax rate

marginal tax ratetax rateseffective tax rate
In the United States in 2016, for example, the highest marginal federal income tax rate was 39.6%, applying to earnings over $415,050. Earnings under $415,050 that year had a lower tax rate of 35% or less. The marginal tax rate on income can be expressed mathematically as follows: where t is the total tax liability and i is total income, and ∆ refers to a numerical change. In accounting practice, the tax numerator in the above equation usually includes taxes at federal, state, provincial, and municipal levels. Marginal tax rates are applied to income in countries with progressive taxation schemes, with incremental increases in income taxed in progressively higher tax brackets.

Tax avoidance

tax planningnot paying any taxestax loopholes
Most countries have entered into bilateral double taxation treaties with many other countries to avoid taxing nonresidents twice—once where the income is earned and again in the country of residence (and perhaps, for U.S. citizens, taxed yet again in the country of citizenship)—however, there are relatively few double-taxation treaties with countries regarded as tax havens. To avoid tax, it is usually not enough to simply move one's assets to a tax haven. One must also personally move to a tax haven (and, for U.S. citizens, renounce one's citizenship) to avoid tax.

Flat tax

flat income taxflatflat rate
A flat tax (short for flat-rate tax) is a tax system with a constant marginal rate, usually applied to individual or corporate income. A true flat tax would be a proportional tax, but implementations are often progressive and sometimes regressive depending on deductions and exemptions in the tax base. There are various tax systems that are labeled "flat tax" even though they are significantly different. Flat tax proposals differ in how the subject of the tax is defined. A true flat-rate tax is a system of taxation where one tax rate is applied to all personal income with no deductions.

Corporate tax

corporation taxcorporate income taxcorporate taxes
States: 0% to 10%, deductible in computing Federal taxable income. Some cities: up to 9%, deductible in computing Federal taxable income. The Federal Alternative Minimum Tax of 20% is imposed on regular taxable income with adjustments. Corporate tax rates in Canada. Corporate tax in the United States. United Kingdom corporation tax. List of Tax rates of Europe. List of Tax rates around the world. U.S. Bittker, Boris I. and Eustice, James S.: Federal Income Taxation of Corporations and Shareholders: paperback ISBN: 978-0-7913-4101-8, subscription service. Kahn & Lehman. Corporate Income Taxation.

Pension

pensionssuperannuationretirement plan
A retirement plan is an arrangement to provide people with an income during retirement when they are no longer earning a steady income from employment. Often retirement plans require both the employer and employee to contribute money to a fund during their employment in order to receive defined benefits upon retirement. It is a tax deferred savings vehicle that allows for the tax-free accumulation of a fund for later use as a retirement income. Funding can be provided in other ways, such as from labor unions, government agencies, or self-funded schemes. Pension plans are therefore a form of "deferred compensation". A SSAS is a type of employment-based Pension in the UK.

Regressive tax

regressiveregressive taxationburdening the poor
A regressive tax is a tax imposed in such a manner that the average tax rate (tax paid ÷ personal income) decreases as the amount subject to taxation increases. "Regressive" describes a distribution effect on income or expenditure, referring to the way the rate progresses from high to low, so that the average tax rate exceeds the marginal tax rate. In terms of individual income and wealth, a regressive tax imposes a greater burden (relative to resources) on the poor than on the rich: there is an inverse relationship between the tax rate and the taxpayer's ability to pay, as measured by assets, consumption, or income.

Social security

social security systemsocial insurancestate benefits
The taxes (including Zakat and Jizya) collected in the treasury of an Islamic government were used to provide income for the needy, including the poor, elderly, orphans, widowed persons, and the disabled. According to the Islamic jurist Al-Ghazali (Algazel, 1058–1111), the government was also expected to store up food supplies in every region in case a disaster or famine occurred. (See Bayt al-mal for further information.) There is relatively little statistical data on transfer payments before the High Middle Ages. In the medieval period and until the Industrial Revolution, the function of welfare payments in Europe was principally achieved through private giving or charity.

Double taxation

double-taxationdouble taxdouble tax treatment
Double taxation is the levying of tax by two or more jurisdictions on the same declared income (in the case of income taxes), asset (in the case of capital taxes), or financial transaction (in the case of sales taxes). Double liability is mitigated in a number of ways, for example: Another approach is for the jurisdictions affected to enter into a tax treaty which sets out rules to avoid double taxation. The term "double taxation" can also refer to the double taxation of some income or activity.

Pay-as-you-earn tax

PAYEpay-as-you-earnpay-as-you-go
It is used to collect by instalments income tax, HELP repayments, Medicare and other payments. PAYG amounts to be withheld are determined based on the Australian Taxation Office (ATO) PAYG schedules. Discrepancies and deduction amounts are declared in the annual income tax return and will be part of the refund that follows after annual assessment or reduce the taxation debt that may be payable after assessment. For an employee's primary job, the withholding tax rate is lower because of the existence of a tax-free threshold in Australia. All other work has tax withheld based on a rate that excludes the tax-free threshold.

Tax exemption

tax-exemptexemption statustax exempt
Tax exemption is a monetary exemption which reduces taxable income. Tax exempt status can provide complete relief from taxes, reduced rates, or tax on only a portion of items. Examples include exemption of charitable organizations from property taxes and income taxes, veterans, and certain cross-border or multi-jurisdictional scenarios. Tax exemption generally refers to a statutory exception to a general rule rather than the mere absence of taxation in particular circumstances, otherwise known as an exclusion. Tax exemption also refers to removal from taxation of a particular item rather than a deduction. International duty free shopping may be termed "tax-free shopping".

Tax law

tax codetaxtaxation law
General Requirements A list of tax faculty ranked by publication downloads is maintained by Paul Caron at TaxProf Blog. Taxes on income and wealth (or estates). Taxation of capital gains versus labor income. Ecotax (short for Ecological taxation) refers to taxes intended to promote environmentally friendly activities via economic incentives. Tax evasion and avoidance leading to reduced government revenue. Due to an Inefficient tax system in many underdeveloped countries, the majority of small businesses are not taxed. J.D. (Juris Doctor) or First degree in law. An English proficiency test score for students with a native language besides English. A bachelor's degree.

Direct tax

direct taxationdirect taxesdirect
Regarding direct taxation for individuals, the policies cover taxation of savings income, dividend taxation of individuals and tackling tax obstacles to the cross-border provision of occupational pensions. Indirect tax. United Kingdom Corporation Tax. Income tax in the United States.

Tax refund

tax rebaterefundrebate
For claiming a refund one has to file the income tax return within a specified period. However, under Sections 237 and 119(2)(b) of the Income Tax Act, the Chief Commissioner or Commissioner of Income Tax are empowered to condone a delay in the claim of a refund. Provisions of refund of duty exists in indirect taxation. In Section 11 B of the Central Excises Act, 1944 which is also applicable in the cases of Service Tax (Finance Act, 1994). In the United Kingdom, income tax is deducted by the employer under the PAYE (Pay As You Earn) tax system via HMRC. Some refunds such as those due to changing tax codes or similar circumstances will be automatically processed via a P800 form.

Indirect tax

indirect taxationindirect taxesindirect
Since the cost of the tax does not vary according to income, indirect taxation includes Ad Valorem tax and Specific tax, of which Ad Valorem (VAT, GST) is proportional and Specific tax is fixed. However, indirect taxation can be viewed as having the effect of a regressive tax as it imposes a greater burden (relative to resources) on the poor than on the rich, as both rich and poor pay the same tax amount for consumption of a certain quantity of a specific good. The taxpayer who pays the tax does not bear the burden of tax; the burden is shifted to the ultimate consumers.

Value-added tax

value added taxVATGoods and Services Tax
The "value-added tax" has been criticized as the burden of it falls on personal end-consumers of products. Some critics consider it to be a regressive tax, meaning that the poor pay more, as a percentage of their income, than the rich. Defenders argue that relating taxation levels to income is an arbitrary standard, and that the value-added tax is in fact a proportional tax in that people with higher income pay more in that they consume more. The effective progressiveness or regressiveness of a VAT system can also be affected when different classes of goods are taxed at different rates.

Taxation in Germany

German tax systemsolidarity surchargeGermany
A distinction is made between: If a taxpayer’s income does not fall into any of these categories, then it is not subject to income tax. This includes winnings at a lottery, for example. The rate of income tax in Germany ranges from 0% to 45%. The German income tax is a progressive tax, which means that the average tax rate (i.e., the ratio of tax and taxable income) increases monotonically with increasing taxable income. Moreover, the German taxation system warrants that an increase in taxable income never results in a decrease of the net income after taxation.

Fixed tax

A fixed tax is a lump sum tax that is not measured as a percentage of the tax base (income, wealth, or consumption). Fixed taxes like a poll tax or sin tax are often considered regressive, but could have progressive effects if applied to luxury goods and services. Since citizens share common roads, military protection, policing, and other government services, some argue that citizens should pay the same amount for basic infrastructure. Fixed taxation removes the moral dilemma of two individuals having to pay significantly different amounts in order to receive the same services, which could be argued as discrimination against economic success.

Taxation in Switzerland

federal taxesSwitzerlandtaxation
The Federal Supreme Court has interpreted this as prohibiting a regressive tax, although flat rate taxes (as instituted in several cantons) are held to be constitutional by tax law scholars. Moreover, double taxation by several cantons is constitutionally prohibited, as is a confiscatory rate of taxation. All people resident in Switzerland are liable for the taxation of their worldwide income and assets, except on the income and wealth from foreign business or real estate, or where tax treaties limit double taxation. For tax purposes, residence may also arise if a person stays in Switzerland for 30 days, or for 90 days if he or she does not work.

Tax policy

tax policiesraising taxestax
For example, in pre-revolutionary colonial America, the argument "No taxation without representation" resulted from the tax policy of the British Crown, which taxed the settlers but offered no say in their government. A more recent American example is President George H. W. Bush's famous tax policy quote, "Read my lips: no new taxes." Tax incidence. Tax law.

Poll tax

head taxpoll taxescapitation
Another income tax statute in 1894 was overturned in Pollock v. Farmers' Loan & Trust Co. in 1895, where the Supreme Court held that income taxes on income from property, such as rent income, interest income, and dividend income (however excepting income taxes on income from "occupations and labor" if only for the reason of not having been challenged in the case, "We have considered the act only in respect of the tax on income derived from real estate, and from invested personal property") were to be treated as direct taxes. Because the statute in question had not apportioned income taxes on income from property by population, the statute was ruled unconstitutional.

Taxation in the United Kingdom

income taxtaxationtax
The income of charities is usually exempt from United Kingdom income tax. 1) the estates of deceased persons. 2) gifts made within seven years of death (known as Potentially Exempt Transfers or "PETs"). 3) "lifetime chargeable transfers", meaning transfers into certain types of trust. See Taxation of trusts (United Kingdom). HM Revenue & Customs. Chartered Institute of Taxation. Government spending in the United Kingdom. Institute of Indirect Taxation. Income in the United Kingdom. Tax credit. Starting rate of UK income tax. Business rates. Council tax. Local income tax. Tax. Tax haven. Tax law. Stephen Dowell, History of Taxation and Taxes in England (Routledge, 2013).

Sixteenth Amendment to the United States Constitution

Sixteenth Amendment16th AmendmentSixteenth
Until 1913, customs duties (tariffs) and excise taxes were the primary sources of federal revenue. During the War of 1812, Secretary of the Treasury Alexander J. Dallas made the first public proposal for an income tax, but it was never implemented. The Congress did introduce an income tax to fund the Civil War through the Revenue Act of 1861. It levied a flat tax of three percent on annual income above $800. This act was replaced the following year with the Revenue Act of 1862, which levied a graduated tax of three to five percent on income above $600 and specified a termination of income taxation in 1866.