Taxes - How Does The Government Get Money?

The different types of taxes that Americans pay is Federal Income Tax, State Income Tax, City/Local Income Tax, Social Security, Medicare, and Deductions .

• Federal Income Tax: Taxes taken out of a paycheck that go to the federal government.

• State Income Tax: Taxes taken out of a paycheck that go to the state government.

• City/Local Income Tax: Taxes taken out of a paycheck that go to the city/local government. Explain that not everyone pays city or local taxes; it depends on where you live and work.

• Social Security: Withholdings that go into the federal government program that provides income support to people who are unemployed, disabled, or over the age of 65.

• Medicare: Withholdings that go into the federal health insurance program for people 65 and older, and also for people with disabilities.

• Deductions : This is an investment account that is used for retirement. Income paid to this account is tax-deferred, which means that taxes generally are not paid until retirement. Sometimes the employer also makes contributions to this account, and they are also tax-deferred.