| Note: this writeup will be the beginning of a series attempting a comprehensive overview of United States income taxation. All Code citations are to the Internal Revenue Code of 1986 as in effect on the date of the writing.
In the United States, all "income" is taxed according to graduated scales: that is, lower income persons are taxed at a lower percentage than people with higher incomes.
Income is obviously the central concept. In Code section 61, "income" is defined as every accession to wealth whatever, including among other things compensation, fringe beneits, business profits, alimony, dividends, lottery winnings, winnings of prizes, and money found by chance on the street. Everything.
The Internal Revenue Code then proceeds to exempt certain accessions to wealth, including gifts (which are taxed to the donor at quite high rates), the receipts from decedents (inheritances) (which will be taxed to the estate, again at high rates), interest on certain government bonds, and assorted other items.
The important concept here is that "income" means everything whatever unless there is a specific statutory exemption for it. If you can't find an exemption in the statute, it's income, and hence taxable.
No individual tax advice is implied by any writeup in this series. Please consult your own tax advisor about any questions you may have about your personal situation. | 
