Most businesses must file and pay federal taxes on any income earned or received during the year. Partnerships, however, file an annual information return but don’t pay income taxes. Instead, each partner reports their share of the partnership’s profits or loss on their individual tax return. Almost every state imposes a business or corporate income tax. However, each state and locality has its own tax laws.

Like many nations, the United States has a progressive tax system, not a regressive one, through which a higher percentage of tax revenues are collected from high-income individuals or corporations rather than from low-income individual earners. Taxes are imposed at federal, state, and local levels. Generally speaking, the federal government levies income, corporate and payroll taxes; the state levies sales taxes; and municipalities or other local governments levy property taxes.Tax revenues are used for public services and the operation of the government, as well as for the Social Security and Medicare programs. As baby boomer populations have aged, Social Security and Medicare have claimed increasingly high proportions of the total federal expenditure of tax revenue. Throughout United States history, tax policy has been a consistent source of political debate.