A Taxing Time?

The Sixteenth Amendment, establishing a federal income tax, was ratified in February 1913. In order to understand the working of taxes, students need to see how taxes will influence budgeting on the personal and government levels. Students are not that far off from needing to budget their own lives and they need to know where their money is going, not just how they earn it.
Primary Disciplines 
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In 1861 Congress passed the first American income tax — at three percent on all incomes more than $800. The revenue was needed to pay the costs of the Civil War. This tax was repealed in 1872. Fifty years later, debate having been renewed about the form and need for taxes, a joint resolution of Congress was ratified by three-fourths of the states. A sixteenth amendment was added to the Constitution. On February 3, 1913, Congress had the power to “lay and collect taxes on incomes.”

The president sends Congress a proposed budget for a fiscal year. Congress has the responsibility to consider, agree with or modify the budget. When both Senate and House have passed a budget, it is sent to the president for his signature. It is this balance of power, public goods and services, budgets and deficits, and tax policies on local, state and national levels that engage us in the readings and suggested activities of this curriculum guide.

Students examine contemporary politics of taxation and the history of Congress as the purse holder to explain how our government provides certain goods and services. They will seek answers to questions: Why do the Committee on Ways and Means and the House Appropriations Committee continue to be powerful? How come real estate and sales taxes vary from state to state? What is the difference between public and a private goods?

Economic education is important at any grade level. Incorporating personal finance into those lessons is essential. Reading receipts, making purchases on a set budget and exploring different sales taxes provide lessons in budgeting, opportunity cost and saving. Taxes are part of American daily life — not just the taxing time of April 15.

March 2013

Resource Graphic 

Develop Vocabulary
Economics, English, Reading, Social Studies
Understanding textbook text, news articles and broadcasts about the economy requires knowledge of the jargon or specialized terminology of economics and finance.  Fifteen of these terms are defined using the glossaries of the IRS for students, Kiplinger’s and the Federal Reserve’s Education Glossary. Review these terms and expect students to use them during discussion, when writing and during debate.

The Word Study “Take Time for Taxes” examines the etymology of “tax,” “assess” and “revenue.” Use the Word Study to help students remember the definition of words as well as to give examples of the development of language. 

Give Some Background
Economics, Social Studies, U.S. History
Teachers may wish to go back to ancient history to introduce the concept and purposes of taxes. Or the Boston Tea Party may be used as a starting point to discuss the complex issues and differing points of view on taxes. As the U.S. commemorates the 150th anniversary of the Civil War, another starting point for introducing the need for governments to have revenue, discuss the role of  the House of Representatives and members of Congress such as Thaddeus Stevens in establishing taxes in this era.

Whatever the time period and events that illustrate taxation, teachers should explain that people do not agree on the taxes. A complete lesson plan, “Taxation and Public & Private Goods and Services” introduces taxation and its impact on individuals as well as public goods and services. It addresses why taxes are a necessity to provide items that the average person cannot provide on his or her own. 

Check Your Knowledge
Economics, Journalism, Social Studies
Review the definitions of “private,” “public,” “goods” and “services.”

Give students “Public vs. Private.” a goods and services warm-up activity. Students are to label each picture. After discussing the answers, students are to use the print or e-Replica edition of The Washington Post to identify examples of both public and private goods and services.


Identify Public and Private
Economics, Government, Social Studies
As students have an understanding of goods and services, discuss with them the differences between those that are provided by the government (public) and those that are provided by private sources or individuals.

The three questions of “What Do You Know About Public Goods and Services?”  will determine what students know about paying for those provided by the government. 


Read KidsPost
Economics, English, Reading, Social Studies
Give students the KidsPost article “Just what is the ‘fiscal cliff’?”  The Q and A is conducted with Neil Irwin, who has the economy beat for The Washington Post. Teachers may use “The Federal Budget and the Fiscal Cliff” as students are reading the article or as a means to quiz their understanding of what they read.


Remember the 16th Amendment
Economics, Government, U.S. History
On March 15, 1909, the Sixty-first Congress of the United States passed (“two-thirds of each House concurring”) a Joint Resolution proposing an amendment to the Constitution. The article read: “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration.”

Three-fourths of the states ratified the proposed amendment. On February 25, 1913, when Secretary of State Philander C. Knox certified the votes, the amendment took effect.

In an Outlook guest commentary, Molly Michelmore, an associate professor of history at Washington and Lee University, provides background on the income tax amendment.  Read The Washington Post’s Why the income tax is worth celebrating.”

Give students “Happy Birthday, Sixteenth Amendment!” to be completed after reading the February 17, 2013, opinion piece.

If this activity is done while students are studying the income tax, teachers might show the 1913 income tax form. This could be compared and contrasted to the current 1040 form.

The President and Congress

From the Constitutional Convention came Congress’s “power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States” (Article 1, Section 8).

 Meet the Purse Holder
Economics, Government, U.S. History
Paying taxes is not a modern phenomenon. Nor is it a particularly American obligation, yet the focus of this activity is on the history of taxation since the adoption of the Constitution. Congress: The Holder of the Purse provides an overview of the movement from individual states having the power to tax to Congress holding the purse.

Questions that may be considered are:
• What is the definition of “lay and collect,” “duties,” “imposts” and “excises”?
• Before the Constitutional Congress, which jurisdictions raised revenue?
• Why would the United States borrow money?
• Give examples of "providing for the general welfare."

Raise the Revenue
Economics, Government, U.S. History
Before reading "The House of Representatives and the Origination of Revenue Bills," ask students to explain the meaning of these terms: blue slipping, concur, direct election, indirect election, Origination Clause, popular election, procedural rules, revenue and vested. It will provide you with information about their understanding of these terms related to government and for students to see what they need to learn. Read the essay. What terms can they now define from context?

Discuss with students the comparisons between the House of Commons in England and the House of Representatives. Why is it not surprising that there are similarities? 

Students may be surprised to learn that state legislatures once elected the two U.S. senators that represented each state. Discuss why this was done. What happened in 1913 to replace indirect election with direct election?

Comment on Committees
Economics, Government, U.S. History
Two powerful committees are introduced in "Committee on Ways and Means" and "House Committee on Appropriations." Read and discuss the duties of both committees.

Do some research to learn who are the current chairs of both committees. Do an e-Replica search to see if The Washington Post has reported on either of these leaders.

Take a closer look at the composition of the two committees. Questions would include:
• Who are the committee members of each committee?
• Are they senior members of Congress?
• Are members distributed geographically so densely populated and sparsely populated states are represented? Rural and urban populations? 

Read articles about the role these two committees are playing in current budget considerations, tax talks, fiscal policies and other topics.

Consider the Politics of Taxation
Economics, Government, Mathematics
The president presents a proposed budget to Congress for approval. Then the debate over funding begins, especially during times of budget deficits.

Give students "The Politics of Taxation." This activity involves reading The Washington Post and researching varied organizations and think tanks to learn about policies that are advocated. Students may begin their research with the following organizations and think tanks:

Americans for Tax Reform (Grover Norquist) 
Cato Institute 
Center for American Progress  
The Democratic Party  
The Hamilton Project  
The Heritage Foundation 
The Republican Party  


Read About Money

Perform the Sixteenth Amendment
Drama, Economics, English, Government, U.S. History
The political maneuvering that lead to the ratification of the income tax amendment has many intriguing elements, including a Supreme Court decision, farmers versus industrialists, a three-time presidential candidate, and ironic consequences of the proposed amendment.

Form three or four groups to research the story behind the Sixteenth Amendment. How groups work in the history (Boston Tea Party, Civil War income tax) of taxation in America, if at all, is their decision. They may use a narrator, music from the time period, or a recurring theme. The dramas they write and perform can be done as a reader’s theatre, a one-act play or sequential scenes.


Think About Sales Taxes
Economics, Mathematics, Social Studies
Teachers can devise an interactive that teaches students about budgets, cost per item and sales taxes.  For example, give students ten cents in real or play money. Have a “store” set up that allows them to buy a penny candy, two-cent candy, four-cent cookie, and a nickel pencil. Ask students to make a list of what they will purchase at the “store.” When students indicate they are ready to make their purchases, have the first student come forward. When the student gives his order, you indicate that he will need more money. When the second student presents her order, again, she does not have enough money. Ask the class if all their lists total ten cents. They probably do.

What have students forgotten? When they plan their budgets before making purchases, they must remember that a sales tax will be charged. If there is a ten percent sales tax, how much money do they really have to spend on their purchase?

Students must now reconsider the items they can purchase. Teachers may also wish to introduce the concept of savings in the exercise before the final purchases may be made. This activity could also be expanded to include the concept of opportunity cost.

Give students “What Sales Taxes Do You Pay?” to discuss the actual sales taxes applied to goods and services in your community.


Read a Receipt
Economics, Mathematics, Social Studies
Much information is provided in a sales receipt. Give students examples of sales receipts from different kinds of businesses — beauty salon, drug store, gas station, grocery store, home improvement business, restaurant, and department store, for example. Be sure that no personal information such as name and credit card number are readable.

Pair students to read the receipts and make lists of the kinds of information to be found on each type of business. Have students come to the board to list under the kind of business headings, the information found from top to bottom of the receipts.

Do all of the receipts have sales tax listed? Is a percentage indicated? Explain to students that states determine the sales tax on goods and services, if it exists, for what items and at what percentage of total sales. In addition, there are local taxes that may be applied and state excise taxes on motor fuel, cigarettes, distilled spirits, wine and beer. (The latter to be discussed as age appropriate.)

View the Federation of Tax Administrators' “State Tax Rate Summary Tables Updated.” Questions that may be asked include:
• What is the sales tax in the jurisdiction where you live?
• Which five states have the highest sales tax rate?
• How many states have no sales tax?
• Why do some states tax food purchases, but allow a rebate or income tax credit on these taxes?


Talk Taxes to Your Constituents
Economics, Government, Mathematics
Assign students the following two Washington Post articles as a pre-reading assignment:
“At 2 capitols, GOP support for tax hikes
“Md. May move on funding for roads

Ask students to imagine that they are members of Congress. Officials from the Department of Transportation have released a report on traffic congestion in their state that recommends the construction of a new road. It is their job to find a way to fund the new road. Using information found researching websites and Post articles, they need to write an editorial or letter to the editor, an open letter to constituents, letting them know their plan for funding the new road. 

For guidance on writing editorials, see INSIDE Journalism: The Editorial Page.

For guidance on writing letters to the editor, see The Citizen's Voice , a past NIE curriculum guide.

Examine 5 Myths
Economics, Government, Reading
“5 Myths about …” is a feature of the Sunday Outlook section. These are guest commentary pieces in which experts are invited to give a perspective on current issues. Some of these may be considered complex for students to read.

Create five groups and give copies of the December 14, 2012, selection on tax increases, spending cuts, loopholes and other economic considerations. Note that some space has been provided after each myth to write. Students are to read and annotate the five sections of “5 myths about tax reform.”  Group 1 has the first myth, group 2 has the second myth, and so on, to annotate individually, then discuss as a group. They are to summarize the idea presented in their assigned myth and give the salient point in Ip's argument.

After all five groups have presented, the class could debate the ideas. Do they agree or disagree with Greg Ip’s points of view? They should explain why.

In The Know 
Barter The direct exchange of goods and services among people. No money is used in the exchange.
Cash Payment for goods or services in the form of coin or currency
Credit The promise to pay in the future in order to buy or borrow in the present; defer payment of debt
Debt Money that is owed; a liability
Deficit The annual amount by which government spending is greater than government income
Federal Income Tax The federal government levies a tax on personal income. The federal income tax provides for national programs such as defense, foreign affairs, law enforcement and interest on the national debt.
 FICA Federal Insurance Contribution Act tax that pays for Social Security and Medicare is split 50/50 between employers and employees.
Flat tax A tax applied at the same rate to all levels of income; also known as proportional tax.
Interest A fee for the use of money over time. It is an expense to the borrower and revenue to the lender. Also money earned on a savings account.
Motor Vehicle Fuel Tax Tax imposed per gallon on fuel purchases; taxes may be applied at different rates per gallon, for example, aircraft jet fuel, diesel, gasoline in bulk or at a service station
Progressive Tax  A tax that takes a larger percentage of income from high-income groups than from low-income groups; i.e., an increasing proportion of income must be paid in taxes as the income increases
Property Tax Group of taxes imposed on property owned by individuals and businesses based on the assessed value of each property; especially real estate, but also on boats, automobiles (often paid along with license fees), recreational vehicles, and business inventories
Public Goods and Services Benefits that cannot be withheld from those who don't pay for them, and benefits that may be "consumed" by one person without reducing the amount of the product available for others. Examples include national defense, streetlights, and roads and highways. Public services include welfare programs, law enforcement, and monitoring and regulating trade and the economy.
Regressive tax A tax that takes a larger percentage of income from low-income groups than from high-income groups
Revenue The income the nation collects from taxes
Sales Tax  Extra charge or surcharge added by the seller on purchases; tax imposed as a percentage of the price of goods (and sometimes services). The tax is generally paid by the buyer but the seller is responsible for collecting and remitting the tax to the tax authorities.
Taxes Required payments of money to governments that are used to provide public goods and services for the benefit of the community as a whole 
Tip Income Money and goods received for services performed by food servers, baggage handlers, hairdressers and others. Tips go beyond the stated amount of the bill and are given voluntarily. This is taxable income. 
  Source: Federal Reserve Education Glossary, Kiplinger's Tax Glossary, Internal Revenue Service Student Glossary

ANSWERS. Happy Birthday, Sixteenth Amendment

1. Farmers, small business owners, middle class consumers.
2. The Supreme Court was giving in to people with money. It made the tax more popular. By 1908, both parties were in favor of the tax.
3. The costs of World War I and World War II needed the revenue from the tax. Other programs included veteran’s benefits, farm subsidies, tax breaks, welfare, food stamps and Medicaid.
4. Responses will include roads, clean air, military, support businesses, schools, hospitals, police, firefighters, emergency workers, shelters, services.
5. Answers will vary.

ANSWERS. What Sales Taxes Do You Pay?
1-6. Answers will vary based upon your jurisdiction. Bonus A and B. Yes. Tips and bonuses are both taxable and should be reported on the tax form.

District of Columbia Public Schools Academic Content Standards 

U.S. Government.  Students analyze and compare the powers and procedures of the national, state, tribal, and local governments.
2. Identify the major responsibilities and sources of revenue for state and local governments. (12.5, Branches of Government)

U.S. Government. Students analyze the influence of the federal government on the American economy.
1. Explain how the role of government in a market economy includes providing for national defense, addressing environmental concerns, defining and enforcing property rights, attempting to make markets more competitive, and protecting consumer rights.
3. Explain the aims of government fiscal policies (taxation, borrowing, and spending) and their influence on production, employment and price levels.
4. Explain progressive, proportional and regressive taxation.
6. Describe how the government responds to perceived social needs by providing public goods and services.
8. Describe how federal tax and spending policies affect the national budget and the national debt. (12.11)

 Learning Standards for DCPS are found online at http://dcps.dc.gov/DCPS/In+the+Classroom/What+Students+Are+Learning

Maryland Academic Content Standards 

Political Science: Investigate the evolution of the U.S. political system as expressed in the United States Constitution
b. Explain and summarize the principles of federalism, popular sovereignty, rule of law, consent of the governed, separation of powers, checks and balances, majority rule, limited government and how they protect individual rights and impact the functioning of government.
g. Summarize an individual’s legal obligations to obey the law, pay taxes, serve on a jury and serve as a witness (Social Studies, Standard 1.0)

Economics: Analyze the role of government in the U.S. economy prior to 1877
b. Explain how the protection of private property rights, regulation of trade, imposition of taxes, and creation of a monetary system are included in the Constitution
c. Examine ways in which the government influenced the economy such as spending, taxing and acquisition of territories (Social Studies, Standard 4)

The Maryland Voluntary State Curriculum Content Standards can be found online at http://mdk12.org/assessments/vsc/index.html.

Virginia Academic Content Standards 

Civics and Economics. The student will demonstrate knowledge of the role of government in the United States economy by
b)  explaining how government provides certain goods and services;
c)  describing the impact of taxation, including an understanding of the reasons for the 16th Amendment, spending, and borrowing;
d)  explaining how the Federal Reserve System acts as the nation’s central bank;
e)  describing the protection of consumer rights and property rights;
f)  recognizing that government creates currency and coins and that there are additional forms of money. (CE.13)

Standards of Learning currently in effect for Virginia Public Schools can be found online at www.doe.virginia.gov/testing/sol/standards_docs/index.shtml.

Common Core Standards 

Elementary Literacy. Determine the meaning of words and phrases as they are used in a text, including vocabulary specific to domains related to history/social studies. (RH.6-8.4)

College and Career Readiness Anchor Standards for Reading. Determine central ideas or themes of a text and analyze their development; summarize the key supporting details and ideas. (Key Ideas, 2)

College and Career Readiness Anchor Standards for Reading. Analyze how two or more texts address similar themes or topics in order to build knowledge or to compare the approaches the authors take. (Integration of Knowledge and Ideas, 9)

Common Core Standards may be found at http://www.corestandards.org/ELA-Literacy/RH/6-8/4/http://www.corestandards.org/