Understanding Taxes | Cash Course | PragerU Kids

Founding Father Benjamin Franklin once wrote in this world nothing can be said to be certain except death and no no no no no no no no don't say it please don't say it please don't say it caxis you said it look taxes are not fun but they're an unavoidable part of life from grain in ancient Egypt to dollars in the United States governments have collected forms of payments throughout history to fund public projects like roads sewage systems and militaries tax amounts are often based on what a person earns buys and owns so the more you know the better prepared you'll be when you earn when you buy and when you own okay fine what kind of taxes do I pay well when you get a job you'll notice your take-home pay or net income is less than what you actually make that's because a percentage of your money will be withheld from your paycheck to pay for income and payroll taxes federal income tax is only paid by the employee to the government who then pays for things like roads infrastructure and the military it's progressive tax this means the rate used to calculate how much you owe increases as your income gets higher some states and even cities also take income taxes on top of the federal amount on the other hand payroll tax is generally paid by both the employee and employer to the government which then pays for social security benefits and Medicare programs payroll tax is 15.3 percent of your gross income or each party pays half or seven point six five percent sales tax is another common tax that you'll pay on most goods and services in Most states this tax is added on the state and local levels to pay for things like police transportation parks and education a portion of the sales tax usually goes to the state to the county and to the city is that why I had to pay 108.25 for this sweet artwork even though the tag said it was a hundred dollars yep that extra eight dollars 25 cents is a sales tax and in this case an 8.25 percent sales tax but sales tax isn't paid on everything rules vary from place to place but most of the time medications and Basic Foods found at grocery stores aren't subject to sales tax hold on I bought this rotisserie chicken and I had to pay a tax on it Ah that's because it's considered a prepared food whereas if you bought a frozen rotisserie chicken it would not be taxed what it can get complicated I know but it's just the start when it comes to taxes if you someday own a home or some land you may have to pay property tax then if you made a profit investing there's a capital gains tax own a business you may have to pay a franchise tax on the net worth of its capital really and buying some soda with that chicken it might require an excise tax are you kidding me oh and that vacation you're on there's probably an added travel tax oh come on okay I get it I get it taxes are everywhere but is there a way to reduce the taxes I pay fortunately there is when it's time to do your taxes you can claim things like charitable giving mortgage interest and health care costs to reduce your taxable income these are called deductions on the other hand credits like the child credit when you have kids you can claim is dependent are subtracted from the amount of taxes owed so now that you know a bit more about taxes it's time to take action one once you've got a job keep a record of all the income you earn you'll need this information when you file your annual tax return with the Internal Revenue Service aka the IRS they're responsible for carrying out the Internal Revenue code enacted by Congress and collecting federal taxes not paying your taxes is called tax evasion and it's a federal crime you could end up paying a fine or even face jail time two know what taxes you are responsible for paying budget for them and pay them on time the deadline is called tax day and is usually on April 15th if you miss this due date you might have to pay more money three get involved all government employees and everything the government does is paid for with your tax dollars it's your responsibility to know how your money is being spent and make sure it's not being wasted when taxes go up make sure you understand why after all you'll be paying for it contact your representative school board or city council members if you feel funds are being mismanaged taxes are an unavoidable and frustrating fact of life but the more you know the less likely you'll be surprised on tax day payday or shopping day [Music] watch more at prairieucids.com and parents don't forget to subscribe