Why The US Tax System Is More Complex That It Seems To Be And How To Deal With It?
The underlying intent of any taxation regime is to generate sufficient funds to provide the citizens with public utility services and to have adequate capital for welfare and defense services. Hence, the taxation system should be simple, fair, transparent, legitimate, and should be easily enforceable by the law of the land. With countries across the world having similar or widely dissimilar similar systems of taxation, the United States of America is known to have the most complex taxation system.
What Makes The Taxation So Complex In The USA?
Understanding the taxation of the world’s most powerful and richest nation i.e., the USA is a very tough job. There are a number of factors as discussed below that have added to the complexity of the system-
The US tax system is not consistent. It keeps on changing with the progress of each financial year. The loopholes that get spotted are revised until the new ones are discovered. This makes the taxation system extremely vulnerable to unscrupulous tax evasion practices and a pile-up of subsequent series of revisions.
The US taxation is collected on both the federal and the state level, which are collected independently for both the states and the federal department and none of them have the authority to interfere in the collection. Moreover, each state has a different taxation system of its own i.e., there will be different tax provisioning on the same article across different states in the United States of America.
In the USA, it is the household that gets taxed and not the individual. This implies that in a family staying together and consisting of more than one individual with a source income, their income is combined for the taxation purpose. However, it is a general practice in other countries such as India, tax is levied on the individual income, which makes the system more synchronized.
There are a number of tax credits and subsidies that need to be considered to arrive at a correct tax payable to the government. Child credit, earned income tax credit, a mortgage interest deduction on the primary residence, and a lot more to incentivize and encourage the public to be more vigilant and honest towards their civic responsibilities.
Both the state and the federal government impose different types of taxes such as income tax, medicare tax, social security tax, house tax, and a lot more. The list is quite extensive and is quite complex, which makes the tax computation quite arduous. Moreover, taxation is designed such that it is politically correct and financially sound.
How To Combat The Taxation Complexities?
The Accounting And Tax Company is pioneering the complex task of accurate and reliable management of finances and tax calculations of both the individuals and different business entities. You can trust your financial complexities with them to avoid any miscalculation, which might attract penalty from the government agencies. Moreover, being watchful of the updates and revisions in the taxation clauses and also being regular in recording your finances can help you to a great extent for easy bookkeeping and financial management.
