Most countries employ a progressive income tax system in which higher-income earners pay a higher tax rate compared to their lower-income counterparts. The U.S. imposed the nation’s first income tax in 1862 to help finance the Civil War. After the war, the tax was repealed; it was reinstated during the early 20th century.
In the U.S., the Internal Revenue Service (IRS) collects taxes and enforces tax law. The IRS employs a complex set of rules and regulations regarding reportable and taxable income, deductions, credits. The agency collects taxes on all forms of income, such as wages, salaries, commissions, investments, and business earnings.
The personal income tax the government collects can help fund government programs and services, such as Social Security, national security, schools, and roads.