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Blue Chip Kids: What Every Child (and Parent) Should Know About Money, Investing, and the Stock Market by David W. Bianchi

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CHAPTER 12 TAXES (THE LOWER, THE BETTER)

Remember the Boston Tea Party and “no taxation without representation”? Well … we have had the representation they wanted for a long time, but we have had the taxes for a long time, too. It is a very complicated subject, but bottom line: We all pay taxes to the federal, state, and local governments every year.

Gross Income

Gross income is the total amount of money that you earn in a given year from all sources.

Net Income

Net income is your gross income minus all of the taxes that have to be paid. It is the money you have left over that belongs to you.

Taxes

There is an old saying that there are only two sure things in life: death and taxes. Nobody likes paying taxes, but the truth is that taxes are the main way that our government raises the money it needs to provide the services that we have all come to expect.

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Our military exists because our tax dollars pay for it. We fight terrorism thanks to the tax dollars that employ the people at our spy agencies who keep us safe. Every aspect of government that you can think of is funded, at least in part, with tax dollars: schools, road construction, environmental protection, our criminal and civil justice system, foreign aid, Medicare and Medicaid, the postal system, maintenance of our national parks, NASA, farm support, you name it. It all depends on tax dollars to keep it going. ...

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