Corporate Tax
A corporate tax, a self-explanatory term, is the tax imposed on a corporation's profits by the government to generate a source of revenue. Corporate tax rates vary widely from country to country, and some countries are considered tax havens because of their low rates. To lower corporate taxes, various deductions, government incentives, and tax loopholes can be employed. As a result, the effective corporate tax rate—the rate at which a company pays the taxes after deductions—is usually lower than the statutory rate. The corporate tax rate in the United States is currently fixed at 21 percent. Certain policies allow businesses to reduce their taxable income. All current operating costs for the business are entirely deductible.
Investment and real estate purchases made with the intention of generating income for the firm are also deductible. A corporation can deduct an employee's salary, medical benefits, tuition assistance, and incentives. Travel expenditures, insurance rates, bad loans, sales tax, interest charges, and fuel costs can all be deducted from taxable income. Tax preparation fees, legal fees, bookkeeping fees, and advertising fees can be used to reduce earnings.
Payroll Tax
A payroll tax is a percentage of an employee's wages that is deducted by the employers and paid to the state on their behalf. Employee compensation, salary, and tips are used to compute it. It is a regressive tax withheld from an employee's paycheck and remitted to the Internal Revenue Service (IRS). Governments utilize payroll taxes to pay for specialized services like social security, workers' insurance, and healthcare.
Local authorities may levy a small payroll tax to help pay for the maintenance and upgrading of local services and infrastructure such as playgrounds, highways, and first responders. These fees also help to fund social insurance services like Social Security and Medicare. These social security taxes account for 23.05 percent of the overall national, state, and local government revenue, according to a recent study by the Tax Foundation. This makes them the 2nd largest source of revenue.