The Mystery of Taxes: Discover Where Your Cents Go 🧾

Hey, Money Smart Kids. I'm Alexia. And I'm Julia. And today we're talking about... Actually, no. Hold on. Before we start, I need to report a crime. A crime? Exhibit A, a receipt. From the toy store?

The slime said $5. I brought exactly $5. And the lady said, "That'll be $5.45." Oh.

45 cents? Out of nowhere? Somebody is sneaking money into the price tags, and I want names. Julia, I can tell you exactly who did it. Look at the bottom of the receipt. What does it say? Tax. Who's Tax, and why does he want my slime money?

Perfect, because that is literally today's episode. We're answering a question that confuses kids and grown-ups: what are taxes and how do they work? And where did my 45 cents go? By the end of this episode, you'll know what taxes are, the three sneaky places they hide, and the weirdest taxes in all of history.

Weird taxes? Like a tax on socks? Weirder. Weirder than socks? Stay tuned. Okay, to explain taxes, we need a volunteer. Gerald. Gerald just got his very first job. He's the official bread taste tester of Pond Park. Honestly, dream job. He works all week tasting bread, and on Friday, he gets paid 100 breadcrumbs He's so excited.

Look at his little tail wiggling But when he opens his paycheck envelope, there are only 80 crumbs. He says, "Excuse me, who ate 20 of my crumbs?" Nobody ate them, Gerald. Those 20 crumbs went to the pond. The pond took his crumbs? The pond is a thief. Hold on, Gerald.

Who keeps the pond water clean? The pond cleaners? And who fixes the little bridge so you won't fall in? The bridge fixer? And who's the lifeguard that chases away the raccoons? Big Steve the heron? Wait, I love Big Steve. - Everybody loves Big Steve, but Big Steve gets paid in crumbs too, and those crumbs come from every duck in the pond chipping in a little bit

And that is what taxes are. Taxes are money people pay to the government, and the government uses it to pay for things everybody shares: roads, parks, firefighters, schools, and lifeguard herons. Okay, but I still think Gerald should get to keep all his crumbs. Gerald thought so, too, so he left.

He left? He flew to his very own private island. No pond, no taxes, all 100 breadcrumbs all his. Living the dream.

Day one. Gerald wants to go get groceries, but there's no road. He's a duck, he can fly. He's carrying a lot of groceries, Julia. Fair. So he builds a road for himself, which costs all 100 crumbs

Day two. His nest catches on fire because he tried to make toast. Gerald, no. So he calls the fire department. There's no fire department. There's no fire department. Day three, Gerald wants to learn how to read. Who's going to teach him? There's no school. Oh, no. Gerald is going to be a crumbless, toastless, nestless duck who can't read.

So what do you think Gerald did? He says, "I would like to go back to the pond, and I would like to pay my crumbs, please." Pause and reflect time. Look around wherever you are right now, or think about your walk to school. Can you spot something that taxes probably paid for? I'll give you a second

Ooh, I got one. The stop sign at the end of our street. Yep, and the street itself, and the streetlight, and the crossing guard. Whoa, taxes are everywhere. Taxes are like litter. So where do you think all that tax money actually comes from? There are three big places.

Like a team of villains? Sure. Sneaky tax number one, the checkout sneak. Its real name is sales tax. The slime robber. When you buy something at a store, a little extra gets added at the register. That's sales tax. How much depends on where you live, and a few states don't have a state sales tax at all. Wait, there are places with no slime robber? We should move. Remember Gerald's Island, Julia.

Right. Never mind. Pro tip, price tags usually don't include a tax. So if something costs exactly $5, bring a little extra. Now you tell me. Sneaky tax number two, the paycheck nibble. Its real name is income tax. When grownups get paid for their job, part of their money goes to tax before it even reaches them.

Like Gerald's 20 crumbs. Exactly like Gerald's 20 crumbs. Does everybody pay the same amount? Not exactly. In the US, people who earn more usually pay a bigger percentage of what they earn. The grownups argue about taxes a lot, how much there should be, and what the money should pay for. Like how we argue about who gets the front seat?

Kind of, but with more charts. And that's one of the big reasons grownups vote, to pick the leaders who decide how tax money gets spent. Sneaky tax number three, the house tax. Its real name is property tax. People who own a house pay a tax every year based on how much the house is worth. And what does the house tax pay for?

In a lot of towns, a big chunk of it pays for public schools. Wait, so our neighbor's house helps pay for my public school? And every family's house helps pay for every other kid's school. So technically, our neighbors are my teacher's boss? That is not how it works, but I like where your head is at. Okay, wait.

Can I say something? Go for it. I thought taxes were money that just disappears, like a black hole for dollars. But it's not actually disappearing. It's like everybody puts a little bit into the same jar so we can buy stuff that's way too big for one family to buy

Like what? Like, nobody can buy their own personal firetruck. A firetruck can cost more than half a million dollars. With our allowance, that would take, like, 1,000 years. Probably more. But if everyone chips in a little, then we all kind of own one together, which means I already own part of a firetruck.

You do. And part of a library, and part of a park, and part of Big Steve. I'm basically a billionaire. You're a part owner of a lot of shared stuff. Being a billionaire is a different episode. I'm gonna go sit in my firetruck.

You can't just go sit in a- It's partly mine, Alexia.

Welcome to the Weird Tax Hall of Fame, where we look at real taxes from history that are so weird, you'll think we made them up. Did you make them up? Nope. 100% real. . Inductee number one, the beard tax. More than 300 years ago, Peter the Great, the ruler of Russia, wanted men to shave their beards so they'd look more modern.

So, if you wanted to keep your beard, you had to pay a tax and carry a special token to prove you paid. A beard passport? Basically, a beard permission slip.

Sir, license and beard registration, please.

Inductee number two, the window tax. Also more than 300 years ago, in England, people paid a tax based on how many windows their house had. So, what did people do? Some of them bricked up their windows so they'd pay less. They chose to live in the dark to save money? That is the most dramatic money decision I have ever heard.

And you can still see some of those bricked-up windows on old buildings today. Okay, my turn. If I could invent a tax, I'd make a broccoli tax. Every time someone makes you eat broccoli, they have to pay you a dollar. That's not how taxes work. Taxes get paid to the government, not you. Fine, then the government pays me a dollar.

Also not how it works. Okay, listeners, your turn. If you could invent one silly tax, what would it be?

Say it out loud right now. Gerald says his tax would be on people who don't share their bread. Honestly, Gerald might be onto something. One last thing. Have you ever heard a grown-up groan about doing their taxes?

Ugh. Like that? Exactly like that. Every year in the US, usually around April 15th, grown-ups fill out forms to check their math with the government. It's called filing your taxes. So it's like checking your homework? Exactly. If they paid too much during the year, they get some money back.

That's called a tax refund. Money back? That's the best part. And if they paid too little, they have to pay the rest. That's the groan part. That's the groan part. And guess who just filed his very first taxes? Gerald. Back at the pond and he got a refund. Three crumbs. He's buying Big Steve a snack. Okay, let's recap.

Three things to remember about taxes. Number one: taxes are money everybody chips in to pay for things we all share: roads, schools, parks, and firefighters. Number two: they hide in three sneaky places. The checkout sneak, that's sales tax; the paycheck nibble, that's income tax; and the house tax, that's property tax.

And number three... Number three: you already own part of a firetruck. Go tell your friends. Here's your challenge this week. We're making you an official tax detective. Next time you're at a store with a grown-up, ask to see the receipt. Find the word tax. How much was it? Bonus mission. Find three things in your town that taxes helped pay for: a library, a park, a school bus, anything.

And if you find a really good one, ask a grown-up to help you send it to us. We might read it on the show. And tonight at dinner, try these with your family. One: if our family could choose one thing for tax money to pay for in our town, what would it be? Two: would you rather live on Gerald's island with no taxes or at the pond with Big Steve?

Why? And three: what's something in our town you're really glad taxes pay for? That's it for today's episode of Money Smart Kids. If you learned something, tell a friend, especially one who's still mad about their slime money. And follow Money Smart Kids wherever you're listening so you don't miss the next episode.

It's free, no tax. Technically, that's true. I'm Julia. And I'm Alexia. And remember... You already own part of a firetruck. Take good care of it. Be smart... And stay money smart