Compare US Tax System With Another Country

Compare US Tax System with Another Country

For this research assignment, you are to write a minimum two-page content (not including cover page and references page) (double spaced) paper comparing the US tax system to that of ONE other country in the world. Choose a country that you might be interested in visiting or studying about and compare its system with the US system. Since this is a short paper, it is very high-level - not much detail. Please address these issues: 1) Corporate and individual tax rates 2) Other sources of federal funding - other than corporate and individual taxes 3) Does the country have a agency similar to the IRS 4) What are the benefits provided to citizens for the taxes that are paid? Use the attached APA template to help you set up your paper correctly.

Paper For Above instruction

The comparison between the United States tax system and that of another country offers insight into different governmental approaches to funding public services and social welfare programs. For this analysis, I have chosen Canada due to its geographical proximity, cultural similarities, and its prominent role in North American economic and social systems. This paper provides a high-level overview focusing on corporate and individual tax rates, other sources of federal funding, administrative agencies, and benefits provided to citizens.

Corporate and Individual Tax Rates

The United States operates a progressive federal income tax system for individuals, with rates ranging from 10% to 37% in 2023. Additionally, the corporate tax rate was recently set at a flat 21%, following the Tax Cuts and Jobs Act of 2017. State taxes further augment these rates, leading to a varied overall tax burden depending on the state of residence.

Canada's federal personal income tax system is also progressive, with rates escalating from 15% up to 33% for higher income brackets in 2023. Notably, Canadian provinces levy additional income taxes, which can significantly increase overall rates. The federal corporate tax rate in Canada is 15%, with provincial rates varying between approximately 11% and 16%. Combining federal and provincial taxes results in a corporate tax rate that can reach up to 31%, depending on the province.

The differences in tax rates reflect divergent fiscal policies, with the US maintaining higher US federal corporate rates but lower individual rates at certain income levels compared to Canada. Conversely, Canada’s higher provincial taxes contribute to a potentially higher overall tax burden for individuals and corporations, especially in high-income brackets.

Other Sources of Federal Funding

The US relies heavily on corporate and individual income taxes as primary revenue sources. Other significant sources include payroll taxes, excise taxes, and tariffs. Payroll taxes fund social insurance programs like Social Security and Medicare. Additionally, revenue comes from estate taxes, gift taxes, and federal borrowing.

Canada’s federal revenue similarly depends on personal and corporate income taxes. Other sources include sales taxes (Goods and Services Tax, or GST), duties on imported goods, and excise taxes. Canada also derives substantial revenue from resource royalties and premiums on government assets, particularly in natural resource-rich provinces like Alberta.

While both countries depend predominantly on income taxes, Canada's reliance on consumption taxes (GST) is somewhat more prominent relative to federal income taxes compared to the US, offering a different revenue-generating approach.

Agency Similar to the IRS

The Internal Revenue Service (IRS) is the US federal agency responsible for tax collection and enforcement. Canada’s equivalent is the Canada Revenue Agency (CRA). Similar to the IRS, the CRA administers tax laws, collects income and other federal taxes, and manages social and economic benefit programs, such as the Canada Child Benefit. The CRA also enforces compliance and audits, ensuring adherence to tax laws.

Benefits Provided to Citizens for Paid Taxes

In the US, taxes fund a variety of social programs including Social Security, Medicare, Medicaid, public education, infrastructure, and national defense. Citizens benefit from these services directly or indirectly, with social security providing retirement income, Medicare and Medicaid offering healthcare support, and public infrastructure facilitating everyday life.

Canada’s social benefits are comparable but extend to robust public health and social safety nets. Citizens benefit from publicly funded healthcare through the Canada Health Act, which guarantees universal coverage for essential health services. Social welfare programs, including employment insurance, old age security, and child benefits, are financed through taxes. These programs aim to promote social equity, economic stability, and quality of life.

The structure of benefits in both countries reflects their commitment to social welfare but differs in scope and implementation. Canada’s universal healthcare system is a significant feature, representing a primary benefit for citizens financed through tax revenue. The US’s emphasis on social security and Medicare provides vital safety nets but often accompanied by higher out-of-pocket expenses and gaps in coverage.

Conclusion

While both the US and Canada rely heavily on income taxes, their approaches to taxation and social benefits exhibit notable differences. Canada’s higher provincial taxes complement federal revenue, ensuring comprehensive social welfare and universal healthcare. The size and structure of tax rates and benefits reflect each country’s priorities: the US emphasizes individual choice within a largely privatized healthcare system, while Canada emphasizes universal access and social safety nets. Understanding these differences underscores how tax systems shape societal outcomes, economic stability, and citizen well-being.

References

  • Canadian Revenue Agency. (2023). About CRA. https://www.canada.ca/en/revenue-agency/services/about-CRA.html
  • Internal Revenue Service. (2023). About IRS. https://www.irs.gov/about-irs
  • Canada Revenue Agency. (2023). Personal income tax. https://www.canada.ca/en/revenue-agency/services/tax/individuals.html
  • Tax Foundation. (2023). Corporate Tax Rates around the World. https://taxfoundation.org
  • U.S. Congressional Budget Office. (2023). The Budget and Economic Outlook. https://www.cbo.gov/publication/58241
  • Government of Canada. (2023). Natural resource revenue. https://www.canada.ca/en/services/environment/conservation/natural-resource-revenue.html
  • Organisation for Economic Co-operation and Development. (2023). Revenue Statistics. https://stats.oecd.org
  • Public Services and Procurement Canada. (2023). Canada Health Act. https://www.canada.ca/en/health-canada/services/health-care-system/canada-health-act.html
  • Centre for Budget and Policy Priorities. (2023). How Social Security and Medicare Are Funded. https://www.cbpp.org
  • American Enterprise Institute. (2022). Comparing Social Safety Nets in the US and Canada. https://www.aei.org

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