Analysis of the U.S. Tax System How Much Do You Really Know?

Understanding the U.S. Tax System How Much Do You Really Know?

In the United States, taxation is not only a crucial source of economic funding but also significantly influences the lifestyle of every household and individual. In recent years, with shifts in the global economic landscape and domestic policy adjustments, the U.S. tax system has once again become a focal point for public discussion. A 2025 report by the Congressional Budget Office CBO revealed that more than 50% of federal revenue comes from individual income taxes, while corporate tax contributions continue to decline. This data has sparked renewed debate over tax fairness and structural reform.

The Basic Structure of the Tax System

The U.S. tax system operates on three levels-federal, state, and local-and includes various forms of taxation such as personal income tax, corporate income tax, sales tax, and property tax. At the federal level, personal and corporate income taxes form the core of government revenue, whereas states and local governments rely more heavily on sales and property taxes. For example, the federal personal income tax follows a progressive rate structure, meaning higher incomes are taxed at higher rates. According to the 2025 tax brackets, single filers start at a 10% tax rate, which can go as high as 37%. Additionally, taxpayers must pay Social Security and Medicare taxes, both of which directly fund social welfare programs.

Recent Changes and Trends

In recent years, U.S. tax policy has undergone significant changes. One of the most notable was the 2017 Tax Cuts and Jobs Act TCJA, which substantially reduced corporate tax rates and simplified individual tax brackets. While this policy initially stimulated economic growth, it also led to a rapid expansion of the federal deficit. According to the U.S. Department of the Treasury, the 2025 fiscal year deficit exceeded $1.7 trillion, marking a decade-high.

Under the Biden administration, tax policy has taken a new direction. The Build Back Better plan aimed to raise taxes on high-income earners and large corporations to fund infrastructure and social welfare initiatives. Although parts of the proposal faced opposition in Congress, the 2025 Inflation Reduction Act IRA still included provisions for a minimum 15% corporate tax on large companies. This move is seen as a key step toward reducing wealth inequality and boosting government revenue.

American Taxpayers’ Habits and Attitudes

For ordinary Americans, paying taxes is both a legal obligation and a civic responsibility. April 15th marks the deadline for filing federal income tax returns, and many individuals prepare their documents months in advance or hire professional accountants to assist them. With the growing popularity of electronic filing systems, more people now submit their returns online, improving efficiency and reducing error rates.

However, compliance issues persist. According to 2025 data released by the Internal Revenue Service IRS, the national tax gap-the amount of taxes owed but not paid-is estimated to exceed $600 billion, with a significant portion coming from high-income individuals and multinational corporations. This has prompted increased scrutiny of tax evasion, including closer monitoring of cryptocurrency transactions.

Controversies and Challenges Facing the Tax System

Despite its maturity, the U.S. tax system continues to face criticism and challenges. Critics argue that the current structure is overly lenient toward high earners and large corporations. For instance, some tech giants exploit overseas subsidiaries to shift profits and avoid hefty corporate taxes. Meanwhile, middleand low-income groups often feel the weight of heavy tax burdens, especially amid rising living costs.

Tax disparities among states have also influenced migration patterns. In recent years, no-income-tax states like Texas and Florida have attracted significant population inflows, while high-tax states such as California and New York have experienced noticeable outflows. This voting with their feet trend reflects increasing sensitivity to tax burdens among Americans.

Future Directions

Faced with mounting fiscal pressures and calls for greater equity, further reform of the U.S. tax system appears inevitable. Experts predict several potential trends

1. Higher tax rates on high-income individuals and large corporations to reduce income inequality.

2. Strengthened international tax cooperation to prevent companies from exploiting tax havens.

3. Simplification and digitalization of the tax system to enhance administrative efficiency.

4. Exploration of alternative tax sources, such as carbon taxes or digital service taxes, to accommodate emerging economic models.

In conclusion, the U.S. tax system is a complex and evolving mechanism that not only affects the health of the national economy but also directly impacts the lives of every citizen. Whether policymakers or everyday taxpayers, understanding this system in depth is essential for making informed and rational decisions.