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What Is Income Tax?

Practically all the governments in the world are supported and funded by various types of taxes that are imposed on its citizens. A majority of the collected taxes are taken from point of sale or from services rendered, but there are also taxes that are collected at the end of the year, called a fiscal year. One of these yearly-collected taxes is income tax. An income tax is considered a “bill” that is given to individuals who earn through salaries and other investment opportunities. An income tax is classified as a progressive tax because the financial obligation of the individual will rise alongside any increase in the individual’s reported income.

The United States didn’t have an official income tax before. But because of corruption and oppression from certain individuals, Congress created the national income tax law in 1914. The law was to ensure that the country’s wealthiest people (and also its greediest) pay their share. The income tax reform will eventually be applied to the middle and working classes.

Income tax is only taken from a positive income. It is not imposed on an individual who declares a net loss. The fundamental income tax structure allows individuals to earn a certain amount of income that is not taxed by the government. The calculation for how much is deducted is listed on both the federal and the state tax forms as a way of aiding individuals. An individual who has not been able to earn more than the imposed standard deduction amount will be exempt from paying any income tax.

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