Their prominence in public policy considerations is further enhanced by the fact that individuals are directly responsible for filing their income taxes, in contrast to the indirect payment of sales and excise taxes. Individual income taxes are a major source of state government revenue, accounting for 27 percent of state tax collections. Some states tie their standard deductions and personal exemptions to the federal tax code, while others set their own or offer none at all. Some states double their single-bracket widths for married filers to avoid the “marriage penalty.” Some states index tax brackets, exemptions, and deductions for inflation many others do not. States’ approaches to income taxes vary in other details as well.Conversely, 33 states levy graduated-rate income taxes, with the number of brackets varying widely by state. Of those states taxing wages, eight have single-rate tax structures, with one rate applying to all taxable income.Forty-one tax wage and salary income, while two states-New Hampshire and Tennessee-exclusively tax dividend and interest income. Forty-three states levy individual income taxes.Individual income taxes are a major source of state government revenue, accounting for 37 percent of state tax collections.
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