American Income Tax System

The American income tax system is a federal framework where individuals and businesses pay taxes on their earnings. Tax rates are progressive, meaning higher incomes are taxed at higher rates. Each taxpayer files a return annually, reporting income, deductions, and credits to determine their tax liability. Taxes fund government services like education, infrastructure, and defense. Various deductions and credits can reduce taxable income, benefiting families and businesses. States and some municipalities impose additional taxes, leading to a complex system that varies by location. Tax compliance is enforced by the Internal Revenue Service (IRS).