Who holds the power to impose taxes?

The correct answer is that both federal and state governments hold the power to impose taxes. This authority is established by the Constitution, which grants Congress the power to levy taxes and also allows states to impose taxes within their jurisdictions.

The federal government has the ability to collect income taxes, payroll taxes, tariffs, and various other taxes to fund national priorities, while state governments can impose sales taxes, income taxes, property taxes, and various fees to support state-level services and infrastructure. This dual ability allows for a more comprehensive funding structure for both national and state needs, enabling effective governance at different levels.

In contrast, local governments often depend on the taxation authority granted to them by state governments and cannot impose taxes independently in the same manner as state and federal levels. Therefore, the correct understanding is that taxation power is a shared responsibility between the federal and state governments, further contributing to the complexity of the American tax system.