| The tax imposed by the U.S. government on the | | | | or fill specific trust funds. |
| taxable incomes of individuals, corporations, trusts and | | | | Several specific taxes, in addition to the general |
| estates is known as federal income tax. Personal | | | | income tax, are also collected by the federal |
| income taxes are payable on the total income of the | | | | government. For example, the social support programs |
| individual (after some permissible deductions). | | | | such as social security and Medicare are funded by |
| Corporate income taxes are payable on the gross | | | | taxes on personal earned income. Estate taxes are |
| profit, the difference between the total receipts and | | | | also levied on inheritances. |
| total direct and indirect expenses. | | | | It is income tax that forms the bulk of the taxes |
| Federal income tax was imposed for the first time by | | | | collected by the U.S. government. Personal income tax |
| the U.S. government in 1861 to finance the Civil War. A | | | | rates range from 0 to 35 percent, depending upon the |
| tax of 3 percent was levied on incomes above $600, | | | | individual's total income. |
| which rose to 5 percent for incomes above $10,000. | | | | Income tax is called a progressive tax because its |
| These rates were raised in 1864. A new income tax | | | | levy is based on the total income of individuals: the |
| act was enacted in the late 1800s. After the Civil War, | | | | higher the income, the more the tax. Corporate tax |
| income tax was rescinded in 1872. | | | | rates also range from 0 to 35%. A corporation pays |
| In the present scenario, the revenues of the federal | | | | taxes on its profits and may choose to distribute its |
| government mainly accrue from personal and | | | | profits after tax as dividend to its shareholders. |
| corporate income taxes. Earlier, tariffs on imported | | | | Despite the fact that the money paid as dividend has |
| goods constituted a large chunk of the government?s | | | | been taxed at the corporate level, it is taxed again in |
| revenues, but, at present tariffs represent only a minor | | | | the hands of the shareholder at the personal level. This |
| portion of federal revenues. Other non-tax fees are | | | | is known as double taxation. The tax paid on the |
| also levied, which recompense agencies for services | | | | dividends by an individual is called dividend tax. |