A Brief Look Into American Tax Structure

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A Brief Look Into American Tax Structure
GAAP vs. IRS Tax Accounting

CJ Moore
Highline CC

January 19, 2014
Prior to the ratification of the Sixteenth Amendment of the American Constitution, the majority of the income received by the federal government was through tariffs and excise taxation (Pollack, 2013). Tariffs are taxes “levied by governments on the value including freight and insurance of imported products (Tariffs and Import Fees, 2014)”. Excise taxes are “taxes paid when purchases are made on a specific good, such as gasoline (Excise Tax, 2014).” While the individual citizen did not incur wage taxation, through trickle-down economics, consumers often dealt with higher costs of goods as importers sought to recoup
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The Amendment states that “Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration (The Constitution of the United States, 2015).” The Sixteenth Amendment represents the birth of the modern federal tax structure. According to the Congressional Research Service, nearly 50 percent of all federal revenue comes from personal income tax, followed by taxes collected from Social Security at 12.9 percent (Sherlock & Marples, 2014). As a result, current federal tax laws are mostly geared towards the collection of income tax, along with other forms of federal taxation. U.S. Code 26 - Internal Revenue Service extensively details definitions for taxable income, expenses, tax rates, deductions, and exemptions for personal income taxes (Title 26 - Internal Revenue Service, n.d.). Additionally, it also details other forms of taxation such as excise, gift, corporate, and employment. In terms of individual income taxes, the tax structure is established to determine taxable income after accounting for deductions and exemptions (U.S. Code: Title 26, n.d.). Once the amount of taxable income has been determined then tax rates, set forth through the IRS code, are applied to individuals’ taxable income for establishing a filing amount to the IRS (Title 26, n.d.). As federal tax laws are
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