Income tax was imposed on both non-residents and American citizens residing and working abroad by the federal government. During World War I, citizens were encouraged to volunteer for tax payments to fund the war effort. In World War II, the government enlisted Walt Disney and his iconic character, Donald Duck, to promote voluntary tax contributions.
At the federal and state levels, income is taxed progressively across four main categories: wages/salaries, business earnings, investment returns, and capital gains. With the exception of capital gains, most types of income are aggregated and taxed at consistent rates. However, for non-residents, the tax liability varies based on the nature of the income being taxed.
The obligation to file a tax return and pay taxes hinges on factors like filing status, deductions, and the amount/type of income received. There’s no age threshold or exemption based on retirement, social security, working remotely, or student status. The key consideration is the amount of taxable income.
It’s important to note that income from various sources, including savings and investments, contributes to taxable income. Determining taxable income often entails extensive calculations, regardless of one’s employment status or other circumstances.
Similarly, there are no fixed tax rates for specific occupations or demographics like retirees, students, healthcare professionals, or public servants. The applicable tax rate is contingent upon taxable income after deductions and adjustments. Tax rates and amounts fluctuate in accordance with changes in income levels.