What is tax revenue?
Tax revenues are defined as the funds received from taxes on income and profit. Social security taxes or “contributions”; Taxes on goods and services, generally classified as “excise taxes”; Income tax; Taxes on property and the transfer of property; and other taxes.
Understand tax revenue
In the United States, tax revenue is composed of funds collected by federal, state, and local governments through taxes on income and profits, sales and use taxes on goods and services, and taxes on property and transfer of property..Tax revenue is also generated through federal income taxes, including federal social security contributions that are required by the Federal Insurance Contribution Act (FICA), federal unemployment tax that is required by the Federal Unemployment Tax Act (FUTA), Medicare taxes, and state wage taxes such as state unemployment taxes, the FUTA Can partially offset duties, and other taxes. At the federal level, income tax is by far the largest source of income.
Most developed countries have one or more tax structures similar to those in the United States. However, many countries are less reliant on income taxes than the United States and derive a greater proportion of their revenue from consumption taxes, which are normally collected as value-added tax (VAT) on goods and services, as well as taxes that directly support welfare programs...
Types of tax revenue
US federal taxes
In general, U.S. income taxes apply to income in any form – whether paid in money, property, or other benefits – obtained from any source, including wages, salaries and other income, rents, returns and gains on investments , Royalties and any other amount or item of value unless specifically excluded. The US has both individual and corporate taxes.
US tax law contains extensive special rules for determining tax on income from various sources, such as: B. Interest or dividends, as well as from various types of business activities. Income taxes are not owed for receiving gifts, inheritances, or qualifying educational grants. However, the estates of donors and deceased are subject to gift and estate taxes on substantial transfers.
State taxes
State tax systems vary. They choose one or more of the various tax forms to finance their households..While some states rely primarily on income taxes, others levy little or no income taxes, but are more dependent on real estate or sales and use taxes. Some states tax the estates of the deceased and some taxable inheritance recipients. Most income and estate and gift taxes, as well as some property taxes, are staggered, with higher tax rates applied to higher amounts or values...
Flat taxes
FICA, FUTA, Medicare, and most government wage taxes are flat-rate with a certain upper limit on the amount that is subject to each tax. These taxes bring in revenue in support of the specific programs identified with them. Employers are required to withhold income and wage taxes on employee compensation and pay the withheld amounts directly to the IRS, along with employers’ own share of wage taxes...
Sales and usage taxes
Sales and use taxes are added to the price of goods or fees for services and are collected by the sellers or service providers who must pay them directly to the federal, state, or local government that collects the tax. Most of these taxes only apply to the amount billed to the end user of the product or service. The items subject to these taxes and the rates that apply vary by jurisdiction. Most systems exempt essential foods and medicines from sales tax. Sales and usage taxes are usually shown separately on invoices...
value added tax
Sales tax systems, which are widespread outside of the United States, differ from sales and use taxes in that sales tax is generally levied at every stage of the exchange or transfer of goods, not just on the transaction price for the end user...
The sources of tax revenue vary between countries
The US relies primarily on individual income taxes for its revenue. Individual income taxes collected at the federal, state, and local levels made up the bulk of total U.S. tax revenue, which was estimated at 41.5% in 2019. Social security taxes accounted for 24.9% of total tax revenue; The consumption taxes, ie consumption and sales and use taxes, amounted to 17.6%. and property taxes 12.1%. Corporate income tax was only 3.9%...
Relative dependence on sources of income varies among the 37 countries, including the United States, that make up the Organization for Economic Co-operation and Development (OECD). Significantly, the US is the only one that doesn’t have sales tax.
In 2019, the simple percentage average of total revenue by source for all 37 OECD countries including the United States was: consumption taxes (sales tax, excise taxes, and sales and use taxes), 32.3% of total tax revenue; Social security tax 25.7%; individual income taxes 24% and property taxes 5.6%. Corporate income tax was 9.6%.
These OECD overall averages are in stark contrast to the US percentages for some sources. For example, as noted above, the US receives far less of its total tax revenue from excise taxes, only 17.6%, and receives a much larger share from income taxes, 41.5%...
It should be noted that the US and OECD corporate and individual income tax shares of total tax revenue are not directly comparable. US income tax comprises a larger portion of business income than the average OECD income tax portion. This difference does not, however, affect the apparently greater reliance of the other OECD countries on sales tax than on income taxes, which make up the bulk of US tax revenue.
US and OECD excise tax rates also differ significantly. Of the 46 states that levy sales taxes, Tennessee had the highest combined state and local tax rate for 2021 at 9.55%, while Alaska had the lowest at 1.76%..In general, the standard VAT rates are much higher: for 2021, the average VAT rate for EU countries and the UK, which exited the EU this year, is 21%. Due to the COVID pandemic, some countries have temporarily lowered their VAT rates below their default values...