The history of taxation in the USA

Vocabulary notes

XVII. Read the text about the history of taxation in the USA and answer the questions after it. To make your understanding clearer some vocabulary notes are given below.

XVI. Match the word combinations from the text below with their Russian equivalents.

XV. Match the words in column A with their definitions in column B.

XIV. Read the international words from the text below. Say what Russian words help to guess their meaning.

XIII. Interpret and extend the following statements.

XII. Answer the following questions.

1. What is taxation?

2. What is tax?

3. What are taxes collected for?

4. What types of taxes do you know? Can you group them?

5. What are the main principles of taxation?

6. Is tax system the same in all countries?

· The burden of the valueaddedtax (VAT ) hits more heavily the pockets of the less well off.

· Luxurytaxes generally represent a high rate of taxation.

· In countries such as Bahrain, Brunei, Kuwait, and Qatar there is no tax at all.

· The highest taxation rate is in Norway.

Federal, local, corporate, civil, declare, (un)constitutional, major, modern, manage, million, collection, massive, reform, act, Congress, restore, confidence.

aim _v – иметь своей целью

tax bracket _n – ступень налоговой шкалы

depend _v – зависеть

insurance _n – страхование

introduce _v – вводить

Supreme Court – Верховный суд

Social Security tax – налог, взимаемый в соответствии с программами социального страхования

In the United States, federal, state and local governments cover their expenses mainly through taxation. Each level of government depends on one or two types of taxes. In general, local governments have received most of their tax revenues from property taxes. State governments traditionally have depended on sales and excise taxes. However, since World War II, state income taxes have become more important.

The federal government’s chief source of revenue has been the income tax, which, in recent years, has brought in about two-fifth of total federal revenues. Other federal taxes include the corporate profit tax and social insurance (Social Security) taxes.

The federal income tax is levied on the worldwide income of U.S. citizens and resident aliens, and on certain types of U.S. income of non-residents.

The first U.S. income tax law was enacted in 1862 in order to support the Civil War. It was based on the principle of progressive taxation. But the income tax was declared unconstitutional by the Supreme Court in 1895. In 1913 a new revenue law appeared, it taxed both individual and corporate incomes. But, except the period of World War I, the income tax system was not a major source of federal revenue until 1930s.

During World War II, the modern system for managing federal income taxes was introduced. Income tax rates were raised to very high levels and these taxes became the principal sources of federal revenue. The tax on wages introduced in 1943 significantly increased the number of taxpayers to 60 million and tax collections to $43 thousand-million by 1945.

The most massive reform of the U.S. tax system was in October 1986: the president signed into law the Tax Reform Act of 1986. With this act, Congress promised individuals and businesses lower tax rates on their income.

The Tax Reform Act replaced the previous law’s 15 tax brackets, which had a top tax rate of 50 percent, with a system that had only two tax brackets – 15 percent and 28 percent. Many supporters of the 1986 Tax Reform Act say that reform was driven by the desire to improve the fairness of the federal income tax system. The new law aims to restore confidence in the system by eliminating inequities.

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