Americans are taxed on "everything" because taxes fund essential government services (defense, roads, schools, healthcare), programs (Social Security, Medicare), and public goods, with revenue coming from income, payroll (Social Security/Medicare), property, and excise (sin/gas) taxes, creating a necessary "price for government" to operate and provide collective benefits, though the amount and types of taxes vary.
The United States uses citizenship-based taxation (CBT), rather than residence-based taxation (RBT), meaning US citizens are taxed on their worldwide income regardless of where they live and where the income was earned.
Canadians pay more in sales and provincial income taxes, while Americans often face lower income taxes but higher out-of-pocket costs for services such as healthcare. A key structural difference is how each country taxes individuals: Canada uses residency-based taxation.
1. Contention: Taxpayers can refuse to pay income taxes on religious or moral grounds by invoking the First Amendment. Some individuals or groups claim that taxpayers may refuse to pay federal income taxes based on their religious or moral beliefs or on an objection to using taxes to fund certain government programs.
Currently, 59% say their taxes are too high, 38% about right and 2% too low. The percentage saying their taxes are too high is up from 45% in 2019 and nearly ties the recent high of 60% in 2023. Between 1947 and 2001, majorities usually said their taxes were too high, with several readings exceeding 60%.
The IRS can file a lien on your property if you don't pay your taxes, including garnishing wages, freezing your bank account, and taking from your 401(k). Failing to file by April 15th will result in a "Failure to File" penalty, which adds significant costs to your tax bill.
The IRS 7-year rule primarily applies to keeping records for claiming a deduction for bad debts or losses from worthless securities, allowing a longer period to file for a credit or refund, but it's not a universal audit limit; it's often a recommended safe buffer for general record-keeping, with the standard IRS audit period usually being 3 years, extending to 6 years for substantial income omission (over 25%) or foreign income issues, and indefinitely for fraud.
In 2022, Canada was ranked 22nd out of the 38 OECD countries in terms of the tax-to-GDP ratio. 1. In this note, the country with the highest level or share is ranked first and the country with the lowest level or share is ranked 38th.
For a $70,000 income in Canada (using 2025 rates), you'll pay roughly $13,000 to $20,000 in total taxes (federal, provincial, CPP, EI), depending on your province, resulting in a take-home pay around $50,000-$59,000, with federal tax around 14.5% or 20.5% depending on the portion, plus provincial tax and deductions like CPP and EI.
And it is important to notethat without the income tax, prices for almost all products willgo down before the sales tax is applied. With savings and investments no longer taxed, Americans willenjoy a capital formation boom.
Taking Advantage of Capital Gains, Not Salary
One of the biggest reasons Bezos pays little in personal income tax is that he doesn't rely on a traditional salary. Instead, he holds most of his wealth in Amazon stock. Here's why this matters: Capital gains taxes are much lower than income taxes in most cases.
Why are taxes so complicated? Our tax system could be simple if its only purpose were to raise revenue. But it has other goals, including fairness, efficiency, and enforceability. And Congress has used the tax system to influence social policy as well as to deliver benefits for specific groups and industries.
To avoid the 22% tax bracket (or any higher bracket), focus on reducing your taxable income through strategies like maxing out 401(k)s and HSAs, deferring bonuses, tax-loss harvesting, smart charitable giving, and strategic asset location, understanding that higher rates only apply to income within that bracket, not your entire income.
The "20k rule" refers to the traditional IRS threshold for reporting income from payment apps and online marketplaces on Form 1099-K: over $20,000 in gross payments AND more than 200 transactions in a calendar year. While a law (the American Rescue Plan) temporarily lowered the threshold to $600, recent legislation, the One Big Beautiful Bill Act (OBBBA) (OBBBA), has reinstated the $20,000/200-transaction rule for tax years starting in 2025, providing relief for casual sellers and gig workers.
Yes, it is illegal to intentionally not pay federal taxes, as the U.S. tax system requires compliance, and failing to pay can lead to severe civil penalties (fines, interest, wage garnishment) and criminal charges (tax evasion, imprisonment), even if the system is described as "voluntary" due to self-assessment. While simple failure to file due to oversight might result in penalties, deliberate evasion, underreporting income, or making frivolous legal arguments against paying are criminal offenses.
High-Income Taxpayers Paid the Majority of Federal Income Taxes. In 2022, the bottom half of taxpayers earned 11.5 percent of total AGI and paid 3 percent of all federal individual income taxes. The top 1 percent earned 22.4 percent of total AGI and paid 40.4 percent of all federal income taxes.
Tax loopholes are legal strategies that enable small businesses to reduce their tax liability. These strategies are embedded within the tax code and offer opportunities to reduce tax bills.