US Taxation on Income, Sales and Property

Each state in the United States has its own taxation system.

There is normally tax on real estate, generally referred to as “property tax”. Taxes on real estate are usually enforced on the real estate’s value by reason of its ownership. For example, the tax on real estate in Texas is enforced on the real estate and specifically on the real estate’s owner as of the first of January of each tax year. The tax is calculated by imposing a tax rate to the real estate’s assessed value as of the tax date. Some other states in the country also implements a tax on real estate transfer. New York is one such state.

There may also be further taxes such as sales tax, income tax and excise tax which includes use tax. Taxable income for specific state purposes is generally based on the federal taxable income but with some specific modifications depending on the state. For example, some of the states in the US apply taxation on gains from municipal bonds obtained from other states that are otherwise not subject to federal income tax. Consequently, this said income must be incorporated in the federal tax income to calculate the amount of income for income tax purposes of a state. States which are primary sources of minerals and oil usually enforce a severance tax. This tax is like the excise tax because the tax is paid on the manufacture of products, and not on the product sales.

There are states which do not impose individual income tax. These include Washington, Texas, South Dakota, Wyoming, Alaska, Nevada and Florida. The states of Tennessee and New Hampshire only enforce interest tax and dividend income tax. The states of New Hampshire, Oregon, Montana and Delaware have no tax on both state and local sales. Alaska permits areas to collect their own sales tax that could reach up to a maximum specified by the state but there is no state sales tax in this state.

History of the United Kingdom Income Tax

The UK income tax was first instigated by William Pitt the Younger in Britain in his December 1798 budget as he needed to pay for tools, weapons and other gears to be used in the Napoleonic Wars. This new progressive income tax started at a rate of 0.83% in the Pound. This was levied on salaries higher than £60. It increased up to a maximum of 10% on salaries higher than £200. Pitt anticipated that this new income tax would put up £10,000,000 but for the year 1799, the total was just over £6,000,000.

Pitt’s income tax was imposed from the years 1799 to 1802 before it was eradicated by Henry Addington during the Peace of Amiens. In the year 1801, Addington took over as prime minister after Pitt resigned. Addington then reestablished the income tax in 1802 when conflict recommenced but a year after the Battle of Waterloo, it was once again eradicated. It was reestablished in the Income Tax Act of 1842 by Sir Robert Peel. Peel was a Conservative who was previously against the income tax in the general elections of 1841 but an increasing budget shortage necessitated a new source of resources and funds. The new income tax imposed then was enforced on salaries higher than £150, based on the model of Addington.

The UK income tax was imposed under five schedules. Any income not falling within those schedules were not subject to taxation. Schedule A was for income coming from any UK land, Schedule B was for industrial occupation of land, Schedule C was for income coming from public securities, Schedule S was for income coming from business and professions, casual income, trading income, overseas income and interest, and Schedule E was for employment income.

Some time after, Schedule F, a sixth schedule, was added. This was for UK dividend income.

Over the years, the UK income tax was revolutionized. Formerly, income tax was imposed on an individual’s income without considering who is/are beneficially entitled to that income. Today however, an individual only has to pay tax on income to which he or she is beneficially entitled. In 1965, majority of companies were exempted from income tax because of the introduction of corporation tax. The schedules were also modified.

In the year 2004, the Finance Act instigated an income tax scheme that has an objective of reducing the employment of common methods of inheritance tax avoidance. This was known as “pre-owned asset tax”.