Chetla Sebree - Understanding Taxation

Each paycheck you receive, whether its for washing dishes or working as a camp counselor, will be taxed.

INTRODUCTION

UNDERSTANDING TAXES

P erhaps youll start your first job this summer. Before your first paycheck as a lifeguard, waitress, or employee in a store or amusement park, you might try to calculate how much youll be making by multiplying your hourly rate by the number of hours you work. But when you look at your pay stub, youll soon learn that you wont bring home every dollar you so carefully calculated. Dont worry. Your employer probably didnt forget to pay you. Instead, you are learning about an important responsibility that comes with having a job: paying taxes.

Your paystub will tell you how much money youve made so far during the year. It also shows how much money youve paid in different types of taxes, like income tax.

Paying Taxes

You probably knew that when people worked, they had to pay taxes. Theres no doubt youve heard your parents or grandparents complain about them. Your paycheck will show you that if theres one thing you cant escape, its taxes. Everyone pays them. No matter how old you are, what you do for a living, or where you live, you will pay taxes in the United States. Income tax is probably the easiest to understand. When you have a job and you are making money, a portion of your income is likely withheld to pay taxes.

While even in Monopoly you pay an income tax, not all states actually have this type of tax at the state level.

But there are many different types of taxes in the United States. You will pay separate taxes to the federal government and to the state government in which you live. Plus, you may pay taxes to your local government (the town, city, or county you live in). Youll also pay for services you might not even understand yet, like Social Security and Medicare/Medicaid.

Where Does the Money Go?

While it can be frustrating to see your hard-earned money go somewhere other than in your pocket, taxation is an important part of government. For instance, the US government acts as a very large business with a lot of debt and expenses. Many of those expenses are services citizens of the United States get to use, such as public assistance like food stamps and education. Other services, like the military, keep the country safe during times of war and peace. To handle these costs, the government needed to create revenue, or income.

Citizens in most countries pay taxes their entire lives. For that reason, its important to understand how taxes work, what kinds of taxes we pay, why we pay them, where the money goes, and who spends our tax dollars. It can help you to better prepare for your future if you have a fuller understanding of taxes.