Federal Income Tax: The federal income tax is the largest source of funds used to finance federal government expenditures. Besides raising revenue, the federal income tax serves a social function by allocating resources, subsidizing some persons or activities, encouraging certain kinds of economic and social behavior, redistributing wealth, stimulating economic growth, and addressing specific social problems such as pollution and urban decay. Although the federal income tax applies to most revenue producing entities including all U.S. citizens and residents, corporations, trusts, and estates, this section is focused on individual income taxation. The tax is a progressive tax -- with the percentage of tax increasing as the net taxable income of a taxpayer increases.