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| Civil War, income tax was rescinded in | | | | rates also range from 0 to 35%.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