Ch.1 Tax Note

Topics: Tax, Taxation in the United States, Taxation Pages: 2 (407 words) Published: July 5, 2014
LO.2 History of U.S. Taxation
An income tax was first enacted in 1634 by the England colonists in the Massachusetts Bay Colony, but the Federal government did not adopt this form of taxation until 1861.
A new Federal income tax on individuals was enacted in 1894.
A Federal corporate income tax, enacted by Congress in 1909.
Under the Sixteenth Amendment, Congress enacted the Revenue Act of 1913, the first 1040 was due on March 1, 1914.
In 1943, Congress passed the Current Tax Payment Act, which provided for the first pay-as-you-go tax system requires employers to withhold for taxes a specified portion of an employee’s wages. Persons with income from other than wages may have to make quarterly payments to the IRS for estimated taxes due for the year.

Tax is increasing complexity. 60% of all taxpayers pay a preparer. 22% purchase tax software.

1.3 Criteria used in selection of a tax structure
In the 18th century, Adam Smith identified the following canons of taxataion;

1.4 The Tax Structure
Tax Base—A tax base is the amount to which the tax rate is applied. In case of the Federal income tax, the tax base is taxable income.
Tax Rates
Proportional—apply the same tax rate.
Progressive—higher rate of tax applies as the tax base increases.

1.5 Major type of Taxes
Property Taxes—Correctly referred to as ad valorem taxes because they are based on the value , property taxes are a tax on wealth, or capital.
Property taxes fall into two categories: those imposed on realty and those imposed on personalty. (more details see the Page 1-7)
Transaction Taxes
Federal Excise Taxes: trucks, Alcohol, Tobacco
State and Local excise Taxes. Many state and local exercise parallel the federal version. Tax on tobacco, gas, unlike the federal version, the rates vary significantly General sales taxes
Severance Taxes
Taxes on Transfers At Death—it is exercise tax. If it taxes the right...
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