This is more out of interest, but being from the UK I am obviously not familiar with the US taxing laws. But how does the system work between State and Federal taxes, do you pay them as one or seperate? And what is the taxation rate in the US, I hear it's even higher than here in the UK (20% VAT - Value Added Tax).

I don't pay taxes (too young and live with parents), but I will tell you that taxes here are not higher than the UK.

Also, it depends on the state. I'm in Texas where we have no state income tax. New York has high income tax etc. etc.

If the state has taxes then you file separately

about 35

Federal and State are separate. For most people, combined rate is about 30% gross. (28% of which is typically Federal)

Originally Posted by TheFinal

I hear it's even higher than here in the UK (20% VAT - Value Added Tax).

You can't adequately compare the UK VAT to the North American sales tax as they're almost completely different things and whether your tax burden is higher or lower depends largely on whether you're the end user, you sell to the end user, you sell to resellers etc.

See the "Comparison with a sales tax" section of http://en.wikipedia.org/wiki/Value_added_tax.

This is just to answer your question about the VAT. Income tax is a whole different story and I won't comment on this as I'm not overly familiar with that side of the US tax regulations.

Federal tax rates are bracketed by adjusted gross income (gross - deductions: standard or itemized). State income taxes are all over the place - some states (like Nevada and Florida) have 0% income tax rates. Other states like California, New York, New Jersey, have much higher tax rates. There's no standard State rate. Many Wealthy people keep a primary residence 0% states for obvious reasons.

Kind of getting the idea of it now. UK VAT is pretty straightforward as we're under one jurisdiction no matter where you are, we all answer to HMRC (Her Majesty's Revenue and Customs) whereas in the US the various states etc, makes it different.

Thanks for the answers guys, cleared up a few things for me