Taxation in Belhavia

The Empire of Belhavia is a federal presidential constitutional monarchy with autonomous provincial and local governments. Taxes and other government charges are imposed in Belhavia at each of these levels. These include taxes on sales, consumption, polls/capitation, transactions, imports, payroll, property, as well as various fees, duties, excises, and charges.

In 2015, Belhavia collected revenues of $1.04955 trillion, amounting to about 15% of the country's GDP. Belhavia is known for being one of the most light, indirect, and regressive tax systems in the developed world.

Levels and types of taxation

Belhavia has an assortment of federal (more commonly called "Imperial" or "national"), state, and local jurisdictions. Each imposes taxes, fees, and charges to fully fund its operations. These taxes may be imposed on the same activity or property without the offset of one tax against another. The types of tax imposed at each level of government vary, in part due to constitutional restrictions. A retail sales tax is imposed at the Imperial level only. Taxes on property are typically imposed only at the local level, though there may be multiple local jurisdictions that tax the same property. Other excise taxes are imposed by the Imperial and some provincial governments. Poll taxes are imposed by most local governments. Customs duties or tariffs are only imposed by the Imperial government. A wide variety of user fees and use charges are imposed and serve as the mainstay of subnational tax regimes.

National taxes

Types of taxes

This is a list and description of national, Imperial-level taxes currently in use. As noted, some tax levies, such as poll and excises, are also authorized and levied by provincial and local jurisdictions at different, mostly lesser, rates.

Former types of taxes

Throughout Belhavian history, changes in political economy have led to important tax regime and levy changes, often significantly, and in particular throughout the 20th century. This is a list and description of tax levies that were formerly in use at one time or another but at a later point were abolished by the Imperial Senate.

Income Tax

Main article: Income tax in Belhavia

The Imperial government levied an income tax on ordinary income and wages and salaries between 1957 and 1986. From its creation until the late 1960s, the income tax regime was progressive but with few brackets and a top rate of nearly 29%. In 1969, the number of tax brackets expanded into at least half a dozen or more depending on the year with a top rate of 55%. In the late 1970s, the top rate hit 72.4%. In the early 1980s, the tax regime was reformed, cut, and simplified, and then phrased out by 1986 and replaced by the National Retail Sales Tax in its place. Since the 25th constitutional amendment taking effect in 1986, the income tax was abolished and has become unconstitutional under Belhavian constitutional law.

Selected marginal tax rate brackets:

Marginal tax rates in 1957

Marginal Tax Rate	Single Taxable Income	Married Filing Jointly or Qualified Widow(er) Taxable Income	Married Filing Separately Taxable Income	Head of Household Taxable Income
5.6%	$0 – $19,500	$0 – $39,000	$0 – $32,750	$0 – $35,999
19.5%	$19,501 – $75,999	$39,001 – $95,450	$32,751 – $67,750	$36,000 – $81,999
33.8%	$76,000 +	$95,451 +	$67,751 +	$82,000 +

Marginal tax rates in 1977

Marginal Tax Rate	Single Taxable Income	Married Filing Jointly or Qualified Widow(er) Taxable Income	Married Filing Separately Taxable Income	Head of Household Taxable Income
12.3%	$0 – $5,500	$0 – $14,750	$0 – $9,250	$0 – $7,500
15.75%	$5,501 – $19,999	$14,751 – $29,990	$9,250 – $23,450	$7,501 – $21,950
20.25%	$20,000 – $35,999	$29,991 – $45,999	$23,451 – $35,850	$21,951 – $35,900
26.75%	$36,000 – $51,000	$46,000 – $61,000	$35,851 – $47,999	$35,901 – $48,750
31.9%	$51,001 – $66,000	$61,001 – $76,000	$48,000 – $59,999	$48,751 – $62,750
37.5%	$66,001 – $90,500	$76,001 – $100,000	$62,751 – $82,999	$62,751 - $84,000
48.2%	$90,501 – $150,000	$100,001 – $159,500	$83,000 – $123,999	$84,001 – 134,500
72.4%	$150,001 +	$159,501 +	$124,000 +	$134,501 +

Marginal tax rates in 1981

Marginal Tax Rate	Single Taxable Income	Married Filing Jointly or Qualified Widow(er) Taxable Income	Married Filing Separately Taxable Income	Head of Household Taxable Income
10.0%	$0 – $75,000	$0 – $90,000	$0 – $68,500	$0 – $82,500
20.0%	$75,001 +	$90,001 +	$68,501 +	$82,501 +

Capital Gains Tax

A capital gains tax was a form of indirect income tax (as defined by most economists) levied on capital gains that existed from 1889 until 1990, even though the income tax was at that time unconstitutional until the 18th Amendment passed in 1957 authorizing such a levy. In a landmark Imperial Supreme Court case Asimov v. Reiss in 1891, the Court ruled the levy constitutional, holding that it was not a "per se income tax" but a tax on investment, which was constitutionally permissible.

The capital gains tax was created at the behest of President Hillel Reiss and his Federalist-controlled Senate at the end of the 1880s to raise new funds from the years-long double-digit economic growth due to the maturation of the Industrial Revolution, as well as to put a temper on speculation and financial bubbles. The 1870s and 1880s were characterized by rapid growth but also financial panics and stock collapses, which injured the interests of the Federalist Party's investor and financier class supporters and constituents.

From 1889 until 1902, capital gains were taxed at a flat rate of 5.5%. In 1902, the new Liberal-controlled government reformed the tax levy by creating a distinction between short- and long-term capital gains, taxing the long-term gains at the same rate of 5.5% and raising short-term gains to a rate of 12.5%.

In 1929, the new Liberal Democratic control of the presidency under Akiva Baron-Cohen and the Senate with modest majorities, reacting to perceived populist, inequity, and rampant financial speculation concerns, raised both rates. Short-term gains were subjected to a levy of 28.3%, and long-term gains to a 18.75% rate.

In the Galarian years, the rates were restored to a flat rate of 12.5% until 1944, when mounting war costs sparked Supreme Autocrat Zachary Galarian to raise them to 25%. In 1947, the Provisional Assembly began to collect the levies again under President Matthew Rabin's direction, and reverted to the short/long-term gains differentiation, taxing short-term gains at 35.4% and long-term gains at 20%.

In 1953, these were raised to 40% and 28.7%, respectively. President Vern Callan's 1969 tax bill raised these further in 1969 to 55% and 35%.

In 1981, the Senate under the Settas Revolution condensed the rates back to a flat 20% levy. With the 25th constitutional amendment enacted in 1986 abolishing the income tax, in 1988 several investors brought suit to Imperial courts alleging that capital gains were a type of income tax and thus unconstitutional. In 1990, owing to the more conservative tilt of the Court due to the appointment of three Settas-era justices, the Court in Slesinger v. Kleinman ruled in a narrow 5-4 decision overturning Asimov v. Reiss and ruling that the capital gains tax was, in fact, a "per se indirect income tax" and thus illegal due to the 25th Amendment. The Court immediately ordered the Imperial government to cease capital gains levy collections, and the Senate two months later formally abolished the tax.

Inheritance, Estate, and Gift Tax

The inheritance, estate, and gift tax is a three-part tax levy that existed in Belhavia in various forms between the 14th century and 2005. From the 14th until the 17th centuries, deceased persons' property, assets, and estate paid a "princely duty" of various rates over time and between monarchs, though historians estimate the historical average to be between 8% and 20% of a deceased person's tangible assets and inheritance was paid as a princely duty.

In 1667, under the Kingdom of Belhavia, a complicated five-part inheritance duty by the Crown was established, levying death duties on realty and/or personalty according to a codex by the King's Council.

In 1812, the newfound Imperial Senate under the constitutional government levied two death taxes, one on estates, and one on inheritances, at a rate of 15%.

This stayed the same until the 1920s, when the Baron-Cohen-era Senate in 1929 raised rates to 33.33% on total inheritance assets and property values of a floor of $500,000 shekels or more (equivalent to $4.5 million dollars in today's value). In 1931, with many wealthy Belhavians turning to "gift" their children and heirs inheritance monies to avoid the death tax, the Liberal Democratic government levied a gift tax of 50% on gifts exceeding $10,000 shekels (approx. $100,000 in 2015 values).

In 1953, President Yavin Leibniz's allies in the Senate raised the rate to 45% and the floor to $1 million. The 1969 Callan tax package raised this to 65% and a floor of $2 million.

In 1981, as part of his broad tax-cut package, President Settas abolished the death tax levy. It was revived, in part, as a revenue-raiser in the 1993 Budget Compromise under President Garrett Holleran, who levied a 2.5% flat tax on inheritances only and left the estate and gift taxes abolished.

In 2005, the Tory-controlled Senate with help from their breakaway conservative Liberal Democratic allies overcame a mainline Liberal Democratic filibuster attempt and repealed the 2.5% inheritance tax, with President Jeff Arnoth reluctantly signing the bill into law.

Non-tax Revenues

Legal distinction

To most laypersons, a tax and an user fee seem similar. Tax experts all agree that both are charges by the government on individuals and entities to raise revenues to pay for public functions. However, the Imperial Supreme Court of Belhavia has ruled that legally a purposeful difference exists between the two forms of government revenue, and that a clear definition differs substantially between both that is more than just semantics.

In reaction to the pervasive resistance, non-compliance, and revolts towards the heavy wartime taxes to pay for the Great Southern War in the early 1710s, the Royal Government instead levied a "series of fees, excises, duties, and impost payments" ("fees" originated from the land estate concept of "fee simple") to raise sufficient funds.

The High King's Court, the royal predecessor to the Imperial Supreme Court, ruled in Lehman Brothers v. Crown (1714) that:

"[...] ...taxes of general application are legally and commonly distinct from so-called 'fees', duties, and imposts by the virtue of the latter class only being levied by the use of some such good, service, or action, where the duty charged only pays for the use whereas [a tax] is a general duty levied on all persons, corporations, or most persons and corporate bodies in some such a class of sufficient breadth that we can say satisfies a 'general levy' [where] the levy is collected after a specific action or transaction, usually at some set amount by the Crown..."

This distinction was upheld in the landmark Supreme Court case Herzl v. Greenblatt (1819).

User Fees and Charges

User fees and user charges are the third largest source of general revenue for the Imperial Government. The government levies fees and charges on: use of government facilities, licenses, permits, tolls on waterways and the Imperial Military Freeway System (the only non-private road system in Belhavia, although it is run and maintained by RMCs), use of national parks, use of the Imperial courts, administrative costs, entry into Belhavia, regulatory costs, and other services and actions.

Non-Protectionist Tariff

Tariffs in Belhavia are commonly and legally referred to as "custom duties" (sometimes referred to alternately as 'import duties'). All import goods face custom duties with their rate depending on established bilateral treaties, free trade agreements, and other conditions.

The custom duty schedule ranges from a minimum 1% to a top rate of 15%, set in 1985. Before 1985, custom rates ranged as high in some cases as 33.33%. However, some goods, imports, or ports of origin have import duty surcharges, bringing the top possible duty rate to 25% in limited circumstances.