Hello and welcome to Planet Money Summer School, the only economics degree you can get without

leaving your hammock.

So nice.

This is class number six, taxes, and Donald Duck.

I'm Robert Smith.

Every week this summer we've been teaching you how to think like an economist, which

is going to come in handy when you tackle our fiendishly clever final exam.

If you pass, you will have earned the right to proudly display your thing that looks

a lot like a diploma.

Last week we talked about how if you tax something, the price goes up and people use less of

it.

That's why we put so much tax on alcohol and cigarettes to discourage their use.

But if that's the case, why is there an income tax?

We want people to work and to make money.

We don't want to discourage it.

Yet income tax is the largest source of money for the federal government.

The answer to this mystery lies back in US history.

So we're giving our usual economist Justin Betzi a break and we're bringing in a special

guest lecturer on economic history from the Ohio State University.

And we always say V.

That's like the choir.

That's the law in Ohio.

...