In: Economics
1. Does your state have an individual income tax? If so, how closely does it conform to the federal tax? Can one deduct the federal tax in computing the state income tax? List some specific ways that the federal and state tax bases differ. What problems, if any, do these differences create in computing your taxes? What additional issues have been created in as a result of Federal Tax reform in 2017. (10 points)
2. What is the rate structure of your state income tax? Are the rates progressive, and if so, how does that progressivity compare to the federal income tax rate structure? (5 points)
3. The two most important state taxes are income and general sales taxes, although states also make substantial use of excise taxes, direct business taxes (usually a corporate income tax), and others. List and discuss briefly four factors that might influence a state in choosing between an income and general sales tax. What is the relative reliance in your state on these two taxes? If the relative reliance in your state is different than average, speculate about why that might be so. (10 points)
1. The individual income tax is levied on the wages,salaries, dividends,interest and other income a person earns throughout the year.The tax is generally imposed by the state in which the income is earned. Federal income tax is a tax on a range of certain types of income.Taxpayers generally calculate and pay federal income tax by filing an IRS form 1040 by April 15 of each year.The federal income tax has seven brackets 10% 15% 25% 28% 33% 35% and 39.6% .The amount of tax you owe depends on your income level and filing status. Under Federal tax reform 2017 Act is based on tax reform advocated by congressional Republicans and the Trump administration .Most of the changes introduced by the bill went into effect on January 1, 2018 and did not affect 2017 taxes.Under this single taxpayers will see their standard deductions jump from $6350 for 2017 taxes to $12000 for 2018 taxes. 2. Taxpayers fall into one of seven brackets , depending on their taxable income 10 % 12% 22% 24% 32% 35% and 37% .Because the U.S tax system is a progressive one,as income rises ,increasingly higher taxes are imposed.But those in the highest bracket don't pay the highest rate on all their income.Whereas in the case of federal tax individuals are subject to graduated tax rates from 10% to 39.6%.Corporations are subject to federal graduated rates of tax from 15% to 35%, a rate of 34% applies to income from $335,000 to $15,000000.State income tax rates vary from 1% to 16% including local tax where applicable. 3.There are many factors which is considered by state before choosing between income and general sales tax. First factor is economic factor which is the Base of any country's development so before the selection of tax ,this factor is primarily concerned.Second factor is political factor, implementation of any tax should also be in order with country's political system. Third factor is administrative which also not to be ignored before selection of taxes.