Why Is There A Child Tax?

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When it comes to Child tax, the government has a different approach. The child tax is paid by parents and not children. It is calculated on the basis of income earned in previous years. In the event that you are earning less than USD 10,000 per year, then your child tax will be 0%. If your annual earnings exceed this amount, then there would be no deduction for child tax. However, if you earn more than USD 50,000 or above, then you can deduct 20% from your taxable income. This means that if you have an annual salary of USD 100,000, then only 80% of your total income will be taxed.

Why is there a Child tax?

There are various reasons why there is an imposition of child tax these includes :

Plan your finances accordingly.

This is because when you pay taxes at the source, you get to know how much money you need to save each month so as to meet all your financial obligations. You also get to see what portion of your monthly expenses goes towards paying off debts and saving for future goals.

To encourage savings

The idea behind imposing child tax is to make people think about their spending habits. When they realize that they cannot afford certain things without sacrificing other important needs like education, health care, etc., they tend to change their ways. They start thinking twice before buying something expensive.

To help fund social programs.

In order to provide better services to its citizens, the government imposes child tax. These funds go into helping those who do not have access to basic necessities such as food, shelter, healthcare, clothing, etc.

To reduce poverty

In case you don’t want to give up anything else but still wish to contribute to reducing poverty, you should consider giving away some part of your income to charity organizations. For example, you could donate 5-10% of your income to charities which work with poor families.

To protect our environment.

If you look around us, we find many examples where nature is being destroyed due to overpopulation. One way to stop this trend is to impose a child tax. By taxing high earners, the government ensures that everyone contributes equally to protecting the planet.

To ensure equality among individuals.

As mentioned earlier, one reason why governments impose child tax is to ensure equal opportunities for every individual. Since rich kids enjoy privileges that others lack, the government wants them to share their wealth with others.

Bottom line

Child tax is imposed to discourage irresponsible behavior. It helps to create awareness regarding the importance of planning ahead. Also, it encourages people to spend wisely and avoid unnecessary purchases.