Every day is a tax day in America. Yes, a lot of confusion with tax forms, quick trips to the mailbox, and a lot of headaches associated with keeping up with taxation requirements. Every American citizen is subject to local, state and federal taxation. Nonetheless, there’s still a huge group of people who do not know anything solid about taxes. Here are 6 things every American citizen should be aware of when it comes to taxation.
1. Taxes are Expensive
According to research, taxes (at all levels), eat up about a quarter of the GDP (gross domestic product) every year. GDP refers to the entire total economic production value of a national annually. That’s about $4.8 trillion dollars. It’s no doubt, not a trivial amount, and most informed taxpayers will understand this all too well. Based on information from the Tax Foundation, the average American citizen will work over three months each year to pay their share of taxes for the year. This means that up to 31% of all the money you make annually going to paying taxes. That’s a whole lot, you agree?
2. Different States, Different Taxes
A significant proportion of American taxpayers still do not know that different states have different local and state codes. Each state and its local authorities will structure a tax system that’s best in line with its needs. States such as New York, California, and Wisconsin have greater tax burdens as compared to others. For instance, the taxation level in New York is nearly double that in Wyoming. Just so you know, it helps to do a little research to determine whether you’re paying more in your state that other Americans are paying in their states!
3. Government Doesn’t Collect Enough Money from Taxation
Although the American government and various local and federal authorities collect a significant proportion of the GDP in taxes, it’s just never enough. That means the federal spending is more than federal taxation. However, it’s important to note that in recent years, the federal spending levels have trickled down especially due to reforms in the budget. But the federal deficit is predicted to rise in the future decades, as a result of overspending. If you were perhaps wondering why the government owes China about $1.3 trillion, then you have your answer.