The Chart Shows That Federal And State Taxes Are
Introduction
Every working citizen in the United States knows that a portion of their income is deducted to pay taxes. However, many people may not be aware of the breakdown of these taxes, such as the percentage that goes to federal and state taxes. This article will explore the chart that shows the breakdown of federal and state taxes.
Explanation of the Chart
The chart shows that federal taxes are higher than state taxes. In 2019, federal taxes accounted for 80% of the total taxes paid by citizens, while state taxes accounted for only 20%. This means that for every $100 of taxes paid, $80 goes to the federal government and $20 goes to the state government.
Types of Federal Taxes
There are different types of federal taxes, including income tax, Social Security tax, and Medicare tax. Income tax is a tax on your income, while Social Security tax and Medicare tax are payroll taxes that are deducted from your paycheck to fund these programs.
Types of State Taxes
State taxes vary by state, but some common types of state taxes include sales tax, property tax, and income tax. Sales tax is a tax on goods and services purchased, while property tax is a tax on real estate. Income tax is a tax on your income, similar to federal income tax.
Why Do We Pay Taxes?
Taxes are an essential part of funding government programs and services. Federal taxes are used to fund national programs, such as national defense and Social Security. State taxes are used to fund state programs, such as education and transportation.
The Importance of Paying Taxes
Paying taxes is not only important for funding government programs but also for maintaining a stable economy. Taxes help redistribute wealth and provide a safety net for those in need. They also help regulate the economy by controlling inflation and promoting economic growth.
Tax Deductions and Credits
Taxpayers can reduce the amount of taxes they owe by taking advantage of tax deductions and credits. Tax deductions are expenses that can be subtracted from your taxable income, such as charitable donations or mortgage interest. Tax credits are dollar-for-dollar reductions of the taxes you owe, such as the Earned Income Tax Credit or the Child Tax Credit.
Tax Planning
Tax planning involves taking steps to minimize the amount of taxes you owe. This can include contributing to retirement accounts, taking advantage of tax deductions and credits, and structuring business transactions in a tax-efficient manner.
Conclusion
Understanding the breakdown of federal and state taxes is an important part of being a responsible citizen. By knowing how taxes are used and how to take advantage of tax deductions and credits, you can minimize the amount of taxes you owe and make the most of your income.