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Tax Law And Accounting Term Paper

Tax Law Taw Law and Accounting

In the United States, 43 states currently impose a personal income tax. New Hampshire and Tennessee tax only "intangible" income, which is composed of interest and dividends. The remaining 41 states have "broad-based" income taxes, with most sources of income subject to tax. In 1932, Washington voters approved an initiative establishing a personal income tax. However, the State Supreme Court ruled this initiative unconstitutional. Since then, the voters have defeated six constitutional amendments trying to enact a personal income tax. The last proposal in 1973 was defeated 77% to 23%. Subsequent efforts at enacting a personal income tax have died in the Legislature.

State income taxes are generally tied in varying degrees to the federal IRS personal income tax statutes. This creates a number of administrative efficiencies for the states. It also makes it simpler for the taxpayer to comply. While most income is subject to tax under a broad-based structure, some sources of income may be considered nontaxable such as certain types of pension income and interest from bonds issued by other government entities. Allowable deductions and personal exemptions may also reduce taxable income for filers and their dependents. Exemptions subtract a fixed amount per household member. Deductions may also subtract a fixed amount per return or per return by filing status (single, joint, etc.). States may also allow itemized deductions similar to those allowed under the IRS personal income tax code. Once taxable income is determined, the entire amount may be subject to tax at a single "flat" rate or it may be subject to tax...

Graduated rates create a "progressive" tax structure, with higher income returns paying a proportionately higher percentage of their income than lower income filers. Personal income tax may be partially "exported" to the federal government as state income tax paid is allowed as an itemized deduction. This lowers the amount of federal tax paid by state taxpayers. Having a tax tied to the IRS code can create administrative efficiencies and enhance enforcement efforts. The prospects for voter approval of a state income tax are not promising in light of the history of prior attempts.
Corporate net income tax is currently levied in 46 states. All of these states either adopt or heavily refer to the federal IRS corporate income tax code. The application of corporate income tax by states is greatly complicated by multi-state firms and by the complexities of corporate organization. By federal law, an out-of-state firm generally must have both a permanent physical presence and employees within a state to be subject to tax. Attribution of profits may be done through "separate accounting" at the establishment level within a state. It may also be done through "apportionment" based on payroll, property and sales. Apportionment methods are not uniform, some states double-weight sales or use sales as the single factor. Further complications are caused by the complexities of corporate organizations, withholding companies and parent-subsidiary relationships. Some states tend to treat corporations within a holding company as separate entities. Others have pursued a…

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References

Dupell, T. (1997). Practice management companies improve practices' financial position. Healthc Financ Manage, 51(11), 56, 58-60.

Marcus, K.R. (1993). Recognizing Medicare hospital payments appeal opportunities: falling into the 'GAAP' (generally accepted accounting principles). Healthspan, 10(9), 8-12.

Reinstein, A., & Budzinsky, A.J. (1992). Closing the GAAP (generally accepted accounting principles) with special reports. Healthc Financ Manage, 46(3), 82, 84-85.
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