Taxation and the National Debt

In this economics lesson, students will analyze arguments concerning income and corporate taxes and the impact of national debt.

Warm-Up

Prior to the lesson you may wish to assign the Overview of Federal Taxes as a reading homework assignment. Write the following question on the board. Read this question to students and relay that this is the essential dilemma of the day: Is there a fair and efficient way to fund and maintain the public services we want?

Distribute Two Political Cartoons or display Slides 1-2 of the Taxation and the National Debt PowerPoint as a trigger to discussing arguments favoring taxation and arguments against too much taxation. Use the Two Political Cartoons – Answer Key as a reference for possible answers.

Give students 2-3 minutes to silently write down three things:

1. What they see
2. What they think the artist is trying to say about taxes
3. Whether they agree with the cartoonists point of view

The objective is not to debate these questions, but rather to clarify what they know and think. After students have had two-three minutes with each picture, call on students to discuss what they wrote and generate class discussion. Generate class discussion using the questions and possible student responses provided in the Two Political Cartoons – Answer Key.

Students should try to challenge, question, and cross-check one another to come to the best possible responses to the two framing questions as a group. The discussion should ultimately focus on the purpose of taxes (to pay for public goods and services) and differing opinions in the class and the cartoons about how much taxation is appropriate.

Define or review the terms tax revenue (income earned from taxes), national deficit (when federal expenditures exceed federal revenue for one time period), and national debt (the accumulation of all past deficits and surpluses). Explain that in today’s lesson students will be analyzing how taxes impact the national debt and arguments surrounding taxation in general.

Modeling

Display Slides 3 and 4 and discuss revenues vs. outlays and how deficits are created. Point out that in 2018 revenues were $3.3 trillion and expenditures were $4.1 trillion. Ask students what this means? Answer: We had a budget deficit of around $800 billion.

Ask students to brainstorm several ways that deficit could be reduced or eliminated, one of which is, of course, raising taxes. Make sure students understand the three broad categories of taxes described here: income, payroll, and corporate. For the purposes of this lesson you can ignore other sources of revenue such as fees or Federal Reserve Bank remunerations as well as outlays. (Alternatively, students could look up these graphics on their own by navigating to the Congressional Budget Office’s 2018 Federal Budget infographic.

Group Activity

Distribute to each student Criteria for Evaluating Taxes which describes the idealized scenario and offers suggested criteria from which students may select. Use the Criteria for Evaluating Taxes – Answer Key as reference for possible answers. Students should read the scenario, add any criteria of their own to the suggestions, and rank what they consider to be the top five most important criteria. Students should then assemble in groups of four and compare responses, coming to consensus on the three most important criteria. Each group must also provide justification for the criteria it selects.

Using Perspectives on Tax Increases give half the groups perspectives on income taxes and the other half perspectives on corporate taxes. (Note: payroll taxes are dealt with in other lessons related to Social Security in this series). Use the Perspectives on Tax Increases – Answer Key as a reference for possible answers. The task for each group is to identify the arguments for and against increasing different taxes as a way to address the national debt. If allowed, encourage students to use personal devices look up additional data to support their arguments.

After about five minutes of reading and intra-group discussion, number the groups starting with one. Announce that all odd number groups will be speaking in favor of raising taxes to help address the national debt and all even numbered groups will be speaking opposing. Explain you are going to give the groups three minutes to put together their strongest argument. Then, randomly call on two groups (one odd, one even) to have a “speed debate” where they will each get to make their case. Have each group identify a speaker.

After the three minutes, focus the attention of the entire class on the first group. Start with an income tax group with an odd number and have the speaker for the group stand and explain in 30 seconds why income taxes need to be increased to address the National Debt. Cut them off at exactly 30 seconds whether they are finished or not.

Call on an income tax group with an even number and have the speaker for the group stand and explain in 30 seconds why income taxes should NOT be increased to help address the national debt. Stop them at 30 seconds.

Call on a second odd numbered group to either respond to the arguments made by the even numbered group or present new evidence. Call on a second even numbered group and repeat this procedure until all groups have been called or the primary arguments have been made and begin to be repeated.

Repeat this process in total or in part for corporate taxes.

Individual Activity

Following the speed debate, point out the varying viewpoints and arguments that arose. Acknowledge that raising taxes to address the national debt is complicated, conflicted, and controversial. At the heart of the matter is what real purpose of taxation is should be and there is no universally accepted expectation for taxes.

Students should now individually revisit Criteria for Evaluating Taxes handout and consider whether the priorities selected in this activity apply to their evaluation of the income and corporate taxes. Based on what they have learned and debated about each tax, do they feel the income tax and corporate tax meet their criteria for what taxes should do? What questions do they have and what additional economic evidence would they seek for better assessment?

Finally, have students use their individual criteria for evaluating taxes to write a short paragraph (or letter to congress) making a recommendation to increase, decrease, or leave at current levels one of the taxes presented in this lesson.

Collect the written component of the individual activity and look to see if students have a grasp of the nature of the taxes in context with what they feel taxes should be used for.

Activity 1

To take a deeper dive into the numbers, have students play the Fiscal Ship Game where they can see specific numbers related to changing tax policies.

Overview of Federal Taxes

PowerPoint Slides

Two Political Cartoons

Two Political Cartoons – Answer Key

Criteria for Evaluating Taxes

Criteria for Evaluating Taxes – Answer Key

Perspectives on Tax Increases

Fiscal Ship Game