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The US system is incredibly complex. The federal government wields very little on-the-ground political power compared to states, but what power it does have is effected via tax policy. It is as if the EU wanted to regulate mobile phone roaming charges by offering a tax rebate on your phone bill, which it then used to calculate a penalty that is added to the phone companies corporation tax bills. There is no federal EU tax bill passed on to citizens of course but if there were you might continue to have your payroll taxes go to your country’s government but you could then submit your phone bills to the federal EU government to get money back from any tax they levy on you. They’d have to levy it in the first place but to avoid unfairness they offset it against anything your state takes, first. At the other end of the spectrum, some city funding is done via income taxes. That seems a lot more equitable than, say, the UK where you pay a rate based on the value of the building your landlord bought. Because it’s an income tax though, and because double taxation is anathema to any voter, it too must be used
to offset state and federal income tax. In a way it would be a lot easier if each entity could just stick to one kind of tax. Maybe city funding via property tax, state funding via income tax, and federal funding via corporation tax. The power of federal government is restricted via the tenth amendment, so it’s always going to try to end run states rights via the only means it has — your tax form. That seems unlikely to change. Also I’m not sure my off-the-cuff idea of having the federal government answer only to corporations (via corporation tax) is a very good one, but it is a good example at least of how the machinations of taxation, if not the politics, might be easier if things were picked apart. |
To give some idea for our not-American friends, here's a very general, far too simplified gist of how the tax system is laid out:
* Federal taxes, overseen by the IRS.
* State taxes, separate and independent from Federal taxes and overseen by the governments of each State.
* County taxes, mostly separate and independent from State taxes and overseen by each county's government.
* Municipal taxes, mostly separate and independent from County taxes and overseen by each municipality.
Taxpayers need to file their taxes with the IRS (Federal), their State, their County, and if applicable their Municipality. No, these taxes are not handled together in the bureaucratic machine (for good reason; individual rights and all that).
The reasons for the complexity are rooted in how the United States is structured politically, where having certain rights and freedoms at each level of governance is a very big deal.