The Different Types Of Taxes In The United States all fall into one of three categories:
Taxes on things you Earn:
Tangible Personal Property (TPP) Taxes
Estate and Inheritance Taxes
There is not enough room to go into detail on all of them, so here are a few common ones.
An individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns.
Many individual income taxes are “progressive,” meaning tax rates increase as a taxpayer’s income increases, resulting in higher-earners paying a larger share of income taxes than lower-earners.
US progressive tax system, federal income tax data 2020
The U.S., for example, levies income tax rates ranging from 10 percent to 37 percent that kick in at specific income thresholds outlined below. The income ranges for which these rates apply are called tax brackets.
Capital assets generally include everything owned and used for personal purposes, pleasure, or investment, including stocks, bonds, homes, cars, jewelry, and art. Whenever one of those assets increases in value—e.g., when the price of a stock you own goes up—the result is what’s called a “capital gain.”
In jurisdictions with a capital gains tax, when a person “realizes” a capital gain—i.e., sells an asset that has increased in value—they pay tax on the profit they earn.
When applied to profits earned from stocks, capital gains taxes result in the same dollar being taxed twice, also known as double taxation. That’s because corporate earnings are already subject to the corporate income tax.
Sales taxes are a form of consumption tax levied on retail sales of goods and services. If you live in the U.S., you are likely familiar with the sales tax from having seen it printed at the bottom of store receipts.
The U.S. is one of the few industrialized countries that still relies on traditional retail sales taxes, which are a significant source of state and local revenue. All U.S. states other than Alaska, Delaware, Montana, New Hampshire, and Oregon collect statewide sales taxes, as do localities in 38 states.
Sales tax rates can have a significant impact on where consumers choose to shop, but the sales tax base—what is and is not subject to sales tax—also matters. Tax experts recommend that sales taxes apply to all goods and services that consumers purchase but not to those that businesses purchase when producing their own goods.
Property taxes are primarily levied on immovable property like land and buildings and are an essential source of revenue for state and local governments in the U.S.
Property taxes in the U.S. account for over 30 percent of total state and local tax collections and over 70 percent of total local tax collections. Local governments rely on property tax revenue to fund public services like schools, roads, police and fire departments, and emergency medical services.
While most people are familiar with residential property taxes on land and structures, known as “real” property taxes, many states also tax “tangible personal property” (TPP), such as vehicles and equipment owned by individuals and businesses.
Overall, taxes on real property are relatively stable, neutral, and transparent, whereas taxes on tangible personal property are more problematic.
