Taxation in the United States

United States

This article is part of a series on the politics and government of the United States

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Taxes in the United States are levied by the Union, States, and localities

File:Tax revenue as a percentage of GDP (1985-2014).png

Total tax revenue as a percentage of GDP for the United States over the past several decades compared to other highly developed States

Legal framework

Fiscal sovereignty

The United States are a federal republic in which the sovereignty of the member States (the States) is limited only by the enumerated Powers expressly delegated to the federal state (the Union) through the federal Constitution. Consequently, the plenary authority to levy taxes is vested in the individual member States of the United States through their constitutions. Within the bounds of the authority delegated to them by State law, the municipalities may also levy taxes. The extent of that authority varies from State to State.

Since The Troubles, the federal Constitution authorises the Union to levy a number of taxes, the most significant of which are a sales tax and a withholding tax, as well as authority to levy tariffs. However, the United States are unique among modern sovereign States in that the Authority to levy these taxes is limited in duration and extent. The Constitution imposes an upper limit on the federal tax rates and causes the federal Authority to levy taxes to expire in 1726. A renewal of that Authority requires a constitutional amendment, which must be approved and ratified by the Legislatures of three-fourths of the several States. If that renewal is not ratified, the Union, that is the federal Government, will conceivably dissolve for lack of funds. All attempts to remove this limitation by amending the constitution to provide for a permanent federal authority to levy taxes have been rejected in the Congress or – no less than five times – by State conventions, most recently in 1717.

Constitutional limits to taxation

The federal constitution imposes certain limits on taxation at the Union, State, and municipal levels. To begin with, it provides that no tax may be levied except where provided for by Federal, State or municipal statute. Because statutes can at all levels be made subject to a referendum (popular referendum at the State and local levels, referendum by State Legislatures at the Federal level), US tax rates are in practice set directly by the voters through elements of direct democracy.

The constitution mandates that taxation must be general and equal in nature, and it must be proportionate to one’s ability to pay. The Federal Court has interpreted this as prohibiting a regressive tax, although flat rate taxes (as instituted in several States) are held to be constitutional by the various State supreme Courts. Moreover, double taxation by several States is constitutionally prohibited, as is a confiscatory rate of taxation.

See also

• North Aegean Taxpayers Federation
• Social security in the United States