Difference in taxation policies in different US states
Taxation and taxation policies form to be the central part of the United State of America’s modern public finance. Even today, taxation policies are by far the most significant source of revenue for the government. Hence, it is of great importance and the primary means of financing government expenditures.
The United State of America’s government imposes a variety of taxes such as excise tax, corporate income tax, sales tax, capital gains tax and so on. However, the taxation policies differ based on the levels in order to finance its operations. Therefore, it has separate federal, state, and local governments with taxes imposed at each of these levels.
The Major Differentiation
Sales and use tax rates vary from state to state and generally range from 2.9% to 7.25% at the state level. On the contrary there are five states that do not have statewide sales taxes. They are: Alaska, Delaware, Montana, New Hampshire, and Oregon.
The federal corporate income tax is applied with a flat rate of 21% to the effectively connected income (ECI). State and local governments may also impose income taxes that generally range between 1% and 12%. Thus the effective tax rate in each state differs and this is how it does.
For a corporation’s capital gains tax, the time period is an important factor that determines the price rate here. Capital gains are taxed at the same rates as ordinary income as long as the shares are held for short-term, i.e within a year’s time frame. In the other scenario wherein the shares are held longer than a year, the capital gains are taxed at a rate of 15%. The rate for the highest tax bracket in this is about 20%.
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