Income tax is the predominant levy in the United States of America. The tax collected on income allows the federal government to fund wars, build parks and roads, perform public services, and pay for current expenditures that aim to maintain a healthy balance in society.
The income tax is a tax levied on the income or wages of all businesses and individuals. Although various income tax systems exist, the United States incorporates a progressive federal tax on the population’s earned income.
As stated before, the federal income tax is applied to both individuals and businesses who earn a salary or income. When the tax is enforced on businesses or corporations the tax is referred to as a corporate tax or profit tax. When the tax is levied on an individual, the individual income tax is a levy on the individual’s total income.
Although deductions or write-offs are available (given the fulfillment of specific requirements) the same tax on a business is only applied to the companies net profits (the difference between their gross income the total expenses and whatever additional write-offs are present.
The progressive tax system of the United States income tax attaches varied tax rates to individual earners. Those citizens who earn more income are taxed at a higher rates. Although the rates, and the qualifying salaries vary, typically the highest tax brackets are those individuals who currently earn over $350,000 per year. This salary is taxed at 35%, meaning 35% of their gross salary is collected by the federal government. In turn the lowest bracket is generally around 20%, and applies to those individuals who earn minimum wage or slightly more.