What Is Taxation?

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Taxation is when governments require citizens to pay a certain amount of money to help fund public institutions. Taxes are used to pay for things like public education, welfare programs, transportation infrastructure, defense funds and libraries.

Many countries employ a progressive tax system, which requires that people with more income pay a higher percentage of taxes than people with less income. The U.S. tax system is a progressive system. Taxes are also used to incentivize certain behaviors; for instance, taxes in the United States are reduced when someone gives to a charity. Tax credits may also be given for things like education, green appliances and cars and even mortgage interest.