Surtax
What Is a Surtax?
A surtax is a tax demanded on top of another tax. The tax can be calculated as a percentage of a certain given amount or it very well may be a flat dollar charge.
A surtax is otherwise called a tax surcharge.
Understanding Surtax
A surtax is generally assessed to fund a specific government program, while regular income taxes or sales taxes are utilized to fund various programs. Consequently, one unique feature of a surtax is that it permits taxpayers to all the more effectively perceive how much money the government is gathering and spending for a particular program.
For instance, in 1968, President Lyndon B. Johnson ordered a 10% surtax on individual and corporate income to assist pay for the cost of fighting the Vietnam With warring. The surtax was collected on income after the ordinary federal income tax was assessed. While most taxpayers likely didn't have the foggiest idea which percentage of their tax dollars were going toward military spending, they could undoubtedly perceive how much extra money they were being approached to contribute specifically to the war exertion.
Special Considerations
The surtax is a lot higher for taxpayers with higher incomes in countries with a progressive tax system like that of the U.S. For instance, a taxpayer who fell in the 20% income tax bracket during the 1960s will pay, after the 10% surtax has been applied, 20% + (0.1 x 20%) = 22%. However, a higher income earner subject to the half marginal tax rate and a similar 10% surtax will pay half + (0.1 x half) = 55%.
Surtax Examples
A surtax is regularly applied to the income of individuals and organizations whose income surpasses a certain threshold. For instance, the solidarity tax and wealth tax are instances of surtax forced on taxpaying substances with income over a predetermined level. In France, the wealth tax, privately known as Imp\u00f4t de solidarit\u00e9 sur la fortune (ISF) or solidarity tax on fortunes, is paid by an estimated 350,000 families with a net worth of more than \u20ac1.3 million.
The surtax is an extra tax on income that is now taxed. Germany presented a solidarity tax with a flat rate of 7.5% on all personal income in 1991 after East and West Germany were combined once more. The surtax was diminished to 5.5% in 1998, which applied to the yearly corporate and individual tax bill of taxpayers towards the solidarity tax. The purpose of the tax was to provide capital for the recently integrated administration.
As another model, in 2013, the Obama administration carried out a 0.9% surtax on Medicare. In effect, the tax is imposed on top of the Medicare tax previously paid by taxpayers and is officially called the Additional Medicare Tax. It applies to wages and self-employment income above $250,000 per couple or $200,000 for a single person. For a more than employee $200,000, s/he would be taxed the regular Medicare tax of 1.45% on the first $200,000 of compensation plus 0.9% surtax on any excess amount more than $200,000.
Features
- Regularly, a surtax is charged when the government needs to raise funds to cover a specific program, like a wellbeing or military initiative.
- A surtax is an extra tax forced by a government on taxpayers, that is notwithstanding another tax.
- A surtax is calculated either as a flat dollar amount or as a percentage of a specific amount.
- Income taxes and sales taxes contrast in that they are utilized to fund various programs, as opposed to just one.
