Personal Taxes
Definition
Personal taxes refer to the amount of money that individuals are required to pay to the government based on their income, property, and other factors. These taxes are used by the government to fund public services and programs.
Analogy
Think of personal taxes like paying for a ticket to enter a theme park. The more you earn or own, the higher your ticket price will be. Just like how the theme park uses the ticket money to maintain rides and provide entertainment, the government uses personal tax revenue to support public infrastructure and services.
Related terms
Progressive Taxation: This refers to a tax system where individuals with higher incomes pay a larger percentage of their income in taxes compared to those with lower incomes.
Marginal Tax Rate: The marginal tax rate is the percentage of additional income that is paid in taxes. As your income increases, you move into higher tax brackets with higher marginal tax rates.
Tax Deductions: Tax deductions are expenses or allowances that can be subtracted from your taxable income, reducing the amount of taxes you owe. Common deductions include mortgage interest payments and charitable donations.
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