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Individual income tax is one of the biggest sources of
revenue for most states. Tax rates vary widely among
states. Florida has no income tax, but California has a
13.3 percent income tax rate.
Differences exist in other taxes, such as sales taxes,
that are collected by states. Five states do not impose
any statewide sales tax: Alaska, Delaware, Montana,
New Hampshire, and Oregon. However, Montana and
Alaska do let sales tax be charged at the local level.
Forty-five states collect statewide sales taxes and
38 states impose only local sales taxes. The five states
with the highest average combined state-local sales
tax rates are Tennessee (9.45 percent), Arkansas (9.26
percent), Alabama (8.91 percent), Louisiana (8.91
percent), and Washington (8.89 percent).
It is essential to understand how the tax system
works in the state where a person lives. Differences
occur not only in what type of tax is collected, but also
at what level (state versus local) the tax is levied.
State governments use the tax collected to meet the
needs of that state. The 50 states (and the District of
Columbia) spent $1.1 trillion in state revenues in fiscal
year 2013, according to the most recent survey by the
National Association of State Budget Officers (NASBO).
For most states, the largest area for spending is
education (K-12 education), Medicaid, and children’s
health programs. Other areas include higher education,
transportation, corrections, and public assistance.
In Canada
The Canada Revenue Agency is the Canadian version
of the IRS. Taxes are levied at the federal, provincial,
and municipal levels. Common taxes include sales tax,
property tax, business tax, and income tax.
The federal income tax rates for Canadians in 2016
was 15 percent on the first $45,282 of taxable income
and up to 33 percent of taxable income over $200,000.
Some indirect taxes paid by Canadians include the
goods and services tax (GST), the harmonized sales
tax (HST) systems, and provincial sales taxes (PSTs).
GOVERNMENT SPENDING
How revenue is spent
Sources of excise tax revenue in 2014:
Revenue received by the government through taxation
funds public spending. Most revenue goes to meeting
social security obligations, social welfare programs, and
public sector pensions. Defense spending makes up 16
percent of the budget. The charts above and below reflect
data from the Office of Management and Budget.
Highway 38%
Tobacco 17%
Aviation 14%
ACA 14%
Alcohol 11%
Other 6%
Defense
16%
All other
3%
Non-security
international
1%
Science and medical
research
2%
Medicare,
Medicaid,
C H I P, e t c.
25%
Social
Security
24%
Safety net
programs
10%
Interest
on debt
6%
Education
3%
Infrastructure
2%
Benefits for
federal
retirees and
veterans
8%
MONEY IN THE US
Public finance
40
35
30
25
15
10
5
0
20
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