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(Continued from previous article) The exemption amounts that are applicable to the alternative minimum tax, have, of course, already been listed, but before we could properly move on to discuss the other components of the alternative minimum tax system, we still have another issue to tackle with regards to exemptions applicable to the alternative minimum tax, and that would be the “phase out of the exemption amount”.

The alternative minimum phaseout exemption amount states that the exemption of any taxpayer decreases by twenty-five percent (that is, twenty-five cents per dollar) of the excess over certain amounts by means of the minimum taxable income of the taxpayer. That is to say, corporations or individuals filing a joint return as well as surviving husbands or wives whose alternative minimum taxable income exceeds one hundred and fifty thousand US dollars shall have their exemptions reduced to twenty five percent of the excess. The same is true and applicable to single individuals or [Read more →]

Having discussed in length taxation in the federal, state, and local levels in the United States of America, it might be best to take up in better detail some of the taxes and fees levied by the government (whether it is in the federal, state or local levels) that have not been completely and thoroughly explained in the previous articles. One such tax is the alternative minimum tax, and of course, that is what we will be taking up for now.

To be clear: the alternative minimum tax is a federal tax, which means it is not applicable in the state or local levels. Also, it should be remembered that the alternative minimum tax is an income tax – meaning, of course, that its rates cannot be levied on anything other than income. The alternative minimum tax is usually regarded as an “extra tax”, that some taxpayers are required and expected to pay on top of the regular tax liability. It is, as a tax system, quite separate from the regular income tax system – which, of course, means it has rules that are uniquely its own.

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(Continued from previous article) So two of the major problems of the land value taxation system – as opposed to the regular real estate system adopted by most of the United States of America – involve gross financial situations that will be borne out of the system, if one takes into account the “individual” and “business” factors of the equation. In both the aforementioned downsides to the land value taxation system, we find that the problems in revenue and the reactions to the decrease in the asset value largely rely on community establishments and businesses as well as land property owners. So in this very small way, supporters of the land property value tax system could argue that the current paradigms of business, assets and the like create problems for the collection of community revenue, and not the tax system. But these two reasons are not the only arguments AGAINST the land property value tax. Perhaps the biggest point against the land value property tax system would be the fact that in some areas – states, counties or municipalities – the system may be able to create some legal conflicts.

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(Continued from previous article) There are indeed so many perks and advantages to the community should it adopt a land value tax instead of a general real estate tax, particularly if the land value tax system they6 choose to adopt is the two-rate land value tax system. But, as is often stressed, like any other taxation system that had been used and developed over the course of taxation history, land value taxation has its own sets of flaws and disadvantages which most people (who are against this system) like pointing out when they are arguing against it.

One of the biggest problems that are pointed out by the opponents of the land value tax system would have to be the fact that sufficient revenue is difficult to raise using this system. That is to say, in order for the land to make the sufficient revenue, one should expect to have the tax rate higher than the rate of return on land – and obviously, this unfair deficit in profit on the part of the owners of the land are more likely to inspire the abandonment of the land property than the [Read more →]

(Continued from previous article) Before anything else, however, it must be explained that there are TWO types of land value taxation to be taken into consideration. The two-rate land value tax system, which has already been briefly described before, entails that there are TWO DIFFERENT RATES for the land property itself and the improvement imposed upon that said land property. The single-rate land value tax system, on the other hand, still separates the rates paid for both the land and the improvement, but maintains the SAME RATE for both. Right now, the kind of land value tax that is garnering attention for its potential would be the two-rate land value tax system. But there are actually advantages to using any for of land value taxation.

For example, there are more perceived advantages to the adoption of the two-rate land value property tax than one might imagine – remember, the two-rate land value property tax entails two separate rates for the land property in question [Read more →]

(Continued from previous article) Unfortunately, state and local revenue cannot fall back on income taxation the way the federal government has come to use income taxation as a windfall. This, of course, is one of the reasons why the rates of property taxes have begun to rise as of late in reaction to the national economic situation, and in order to be able to prevent further hikes – at least, in order to prevent the rates from hiking up to a ridiculous percentage – the state and local governments have to now scramble to find ways of off-setting the possible losses to their budget. The other taxes, mentioned before, will be discussed in better detail later.

To be clear, the government (state, local or otherwise) determines their budget based on what projects and expenditures are required to keep the scope of their governance running smoothly. The budgets naturally have to be balanced – that is to say, the budget needs to be fair not only to the parties involved, but also fair in terms of project focus – one cannot [Read more →]

(Continued from last article) Regardless of whether or not the results of you tax payment on a more local level is more obvious than the results of the tax payment collected by the government, both are nevertheless important, and as such, both should be given serious consideration. That being said, we now go back to the topic at hand: taxation in the state and local levels.

The first thing that we remember, and this is quite obvious but could never be stressed enough, is that each state has a different tax system from the other state. While this fact should be common knowledge, there have been some cases of people being shocked at the different tax rate they have to pay in the event that they move from one state to another (whether the move was for personal or professional reasons). But that doesn’t have to mean that these systems and rates would be vastly different.

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Now that we’ve finished taking up federal taxation in the United States of America – that is to say, now that we’ve finished discussing how the federal or central government of the country manages to generate an annual income, it’s time to talk about the methods by which we are taxed on a local level – in other words, we’re going to take up state and local Taxation in the US. But before anything else, it would be best to have a bit of an overview on state and local government taxation to understand how it could be different from federal taxation.

First and foremost, it has to be understood that each state government that governs the state that make up the United states of America has the complete authority to charge taxes on their citizens and any activities they deem taxable. This supposed complete authority – at least, the term “complete authority” – describing the powers of taxation that each state government is entitled to have is rather confusing however, considering that the authority each state has is limited by two [Read more →]

(Continued from previous article) Now that we’ve finished talking about transfer taxes, we can move on to talk about the last item in our list of federal means of generating revenue. This last means is technically a type of income taxation – because it taxes the income of corporations. The reason, however, why this was not discussed earlier as PART of income taxation is because while a corporation can be regarded as a singular entity, it is still not an individual PERSON. It was much easier to follow the progression of individual income tax to things like excise taxes, payroll taxes and transfer taxes simply because those things are immediately of concern to a normal individual person. Corporate income tax is a little more difficult to take up in this sense, since it is related to a non-human entity that is made up of several individual persons – and not everyone concerns themselves with corporate taxation. That being said, we will now move on to discuss federal taxation in the form of corporate income tax.

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(Continued from previous article) Now, another thing we have to take up in discussing gift taxes would have to be the differences between the gift tax as an American transfer tax and the federal income tax treatment of gifts – because there IS a difference, and sometimes they can get confused for each other.

One important thing we have to remember is that according to US federal tax laws, most gifts are excluded from the computation of income tax; that is to say, an individual’s gross income does not at all include the value of any property they received by means of gifting, inheritance, legacy or testament. But, should said property generate ANY INCOME AT ALL, then tax must be paid by the recipient of the gift or inheritance. Also, any gift (in general) received from one’s employer – for the benefit of one’s self – is to be considered income. There are, of course, certain statutory exemptions to this rules, such as the de minimis fringe amounts and as awards or awards for achievement. Nevertheless, on the whole, gifts cannot [Read more →]