How does the constitution limit federal and state powers of taxation?


The federal government should not enact any legislation or adopt any regulation that would preempt, either directly or indirectly, sources of state revenues, state tax bases, or state taxation methods.

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Public finance

Public finance is the study of the role of the government in the economy. It is the branch of economics which assesses the government revenue and government expenditure of the public authorities and the adjustment of one or the other to achieve desirable effects and avoid undesirable ones.

The purview of public finance is considered to be threefold: governmental effects on (1) efficient allocation of resources, (2) distribution of income, and (3) macroeconomic stabilization.


The United States of America is a federal republic with autonomous state and local governments. Taxes are imposed in the United States at each of these levels. These include taxes on income, payroll, property, sales, imports, estates and gifts, as well as various fees. In 2010 taxes collected by federal, state and municipal governments amounted to 24.8% of GDP. In the OECD, only Chile and Mexico taxed less as a share of GDP. The United States also has one of the most progressive tax systems in the industrialized world.

Taxes are imposed on net income of individuals and corporations by the federal, most state, and some local governments. Citizens and residents are taxed on worldwide income and allowed a credit for foreign taxes. Income subject to tax is determined under tax accounting rules, not financial accounting principles, and includes almost all income from whatever source. Most business expenses reduce taxable income, though limits apply to a few expenses. Individuals are permitted to reduce taxable income by personal allowances and certain nonbusiness expenses, including home mortgage interest, state and local taxes, charitable contributions, and medical and certain other expenses incurred above certain percentages of income. State rules for determining taxable income often differ from federal rules. Federal tax rates vary from 10% to 39.6% of taxable income. State and local tax rates vary widely by jurisdiction, from 0% to 13.30%, and many are graduated. State taxes are generally treated as a deductible expense for federal tax computation. In 2013, the top marginal tax rate for a high-income California resident would be 52.9%. Certain alternative taxes may apply.

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The constitutional basis of taxation in Australia is a group of powers in the Australian Constitution: Sections 51(ii), Section 90, Section 53, Section 55, and Section 96. This article deals with these sections, as interpreted by the High Court of Australia.

Australia is a federation and legislative power is distributed between the Commonwealth and the States. Section 51 enumerates areas of Commonwealth power. These powers are concurrent, and states can legislate on them, or on any topic not specifically prohibited them by the Constitution (e.g. Section 53 specifically enumerates areas, such as the federal public service, where states may not legislate), but Section 109 holds Commonwealth laws prevail in circumstances of inconsistency.

Relationships between State and Federal parties often shape environmental laws and the practical impact of those laws. In addition, environmental problems often do not have well defined boundaries and thus jurisdictional overlap complicate these matters. These complications bring into question how environmental laws are created, how these laws should be enforced, and whether the state or federal government should have the final word in specific environmental debates.

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federal government

A federation (Latin: foedus, foederis, 'covenant'), also known as a federal state, is a political entity characterized by a union of partially self-governing states or regions under a central (federal) government. In a federation, the self-governing status of the component states, as well as the division of power between them and the central government, are typically constitutionally entrenched and may not be altered by a unilateral decision of either party, the states or the federal political body.

The governmental or constitutional structure found in a federation is known as federalism. It can be considered the opposite of another system, the unitary state. Germany with sixteen Länder is an example of a federation, whereas neighboring Austria and its Bundesländer was a unitary state with administrative divisions that became federated, and neighboring France by contrast has always been unitary.


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