Excise taxes are commonly levied on cigarettes, alcoholic beverages, soda, gasoline, insurance premiums, amusement activities, and betting, and typically make up a relatively small and volatile portion of state and local and, to a lesser extent, federal tax collections.įorty-two states levy individual income taxes. Their prominence in public policy considerations is further enhanced in that individuals are actively responsible for filing their income taxes, in contrast to the indirect payment of sales and excise tax An excise tax is a tax imposed on a specific good or activity. Individual income taxes are a major source of state government revenue, accounting for 38 percent of state tax collections. Subscribe to get insights from our trusted experts delivered straight to your inbox. Stay informed on the tax policies impacting you. Some states tie their standard deductions and personal exemptions to the federal tax code, while others set their own or offer none at all. It is sometimes referred to as a “ hidden tax,” as it leaves taxpayers less well-off due to higher costs and “ bracket creep,” while increasing the government’s spending power. The same paycheck covers less goods, services, and bills. ” Some states index tax brackets, exemptions, and deductions for inflation Inflation is when the general price of goods and services increases across the economy, reducing the purchasing power of a currency and the value of certain assets. A marriage penalty typically occurs when two individuals with similar incomes marry this is true for both high- and low-income couples. Some states double their single-bracket widths for married filers to avoid a “ marriage penalty A marriage penalty is when a household’s overall tax bill increases due to a couple marrying and filing taxes jointly.
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