Grades Higher Education, 9-12
Students will be able to:
- Understand the reason for taxes and evaluate which goods and services are provided by business and which by governments.
In this economics lesson, students will learn about taxes and the reason for taxes.
Tell students to imagine that everyone thinks that they need a new school building. Ask students to think about ways that the money to build the new school could be raised. Give them time to suggest ways–a bake sale, contributions and list them on the board. Ask how much money do you think could be raised doing these things? Ask students if they have an idea of how much it costs to build a new school building. Tell them that the average cost to build an elementary school is $16 million. Ask if they think the list will generate $16 million. Tell students that there is a way for the new school to be built, and that’s what you will talk about today.
Bring in a receipt from something you have recently purchased, perhaps with just one or two items on it. Tell students that they will be doing a math problem and will tell you how much you had to pay for your item(s). Read off the name of the item(s) and its (their) cost and ask students to add them up and give you how much you had to pay. Tell students that you didn’t pay that amount, you had to pay more than that! Be dramatic and ask questions:
- How is that fair?
- Why did the store charge you for more than your items cost?
Tell students that when we buy things at the store, we are charged a sales tax. This is an extra amount that is based on how much we spend at the store. Ask student, who gets that extra amount? Tell students that the store collects it, but that the store sends that extra amount to the government so that the government can provide the things we use everyday, like a school building. Ask students a series of questions:
- Can you think of other things that they or their families use that they don’t directly pay for?
- Did you pay when you drove on the street in front of the school? Who paved the street?
- Do you pay a police officer to help you? Who pays their salary?
Make a list of government-provided goods and services and tell students that if the government didn’t provide these, then we may not have them, or we wouldn’t have as many of them. Ask students if they know why April 15 is an important day. If no one knows, ask if they have heard their parents talk about paying their taxes by that day. Explain that there are a lot of different kinds of taxes, and when we earn money, we have to pay a tax to the government on the money we make when we work. That’s the tax that is due on April 15 of every year. This tax is called an income tax.
Tell students that there are other kinds of taxes, two of which you will talk about. We pay property tax on things that we own, like our house and in some states, cars and personal belongings. We also pay a tax on certain things that we buy, like gasoline and airplane tickets. These are called excise taxes. They are different than sales taxes because sales taxes are taxes on how much we pay for something. Excise taxes are on how much we buy of something–the number of things we buy. For example, if I buy 10 gallons of gas and the excise tax is 18 cents a gallon, how much will I pay in excise tax? $1.80. If I buy 10 books for $5 each and the sales tax is 10%, how much will I pay in sales tax? $5. An excise tax is based on how many I buy. A sales tax is based on how much I spend. Tell students that there are 3 basic kinds of governments that collect taxes and provide services: local, state, and national. Give examples of what each level provides. For example, local taxes go to supporting schools, local parks, fixing potholes; state taxes go to maintaining state parks, state highways; national taxes support the military, interstates, national parks.
Assign groups of 4-5 students. Make 1 copy of Goods and Services Cards, and 1 of Government or Business Cards and cut into cards, one combined set of 24 cards for each group. Tell students that they will play a game of concentration in groups, where they have to match the picture of a good or service to a card with “government” or “business”, to indicate which is more likely to produce it. Have the groups shuffle the cards well and lay out in a 4×6 matrix, face down. Tell students that they will take turns, each student turning over 2 cards to see if they can match the picture with the correct “provider” card. If they get a match, they pull that pair out of the matrix and the turn passes to the next student. If they turn over two picture cards, two provider cards, or the picture and provider do not match, they turn them back over in their places and the turn passes to the next student. Students continue playing until all matches have been made. After all matches have been made, ask students to discuss in their groups examples of the goods/services that are provided by the other entity than what they matched them with. For example, they probably matched “security” with government, but ask if they can think of a time when a business would provide security (private security guards) or “package delivery” could be done by the U.S. Postal Service or FedEx. Tell students that in some cases, businesses do provide different versions of some of these goods and services.
Tell students to work individually. Ask students to assume they earn $5,000 every month. Ask them to decide how much of that $5,000 they think is “fair” to pay in local, state, and national taxes (3 allocations). Remind them what each level of government provides and ask how much of their $5,000 do they think is the right amount for each level of government to take:
- How much are local services worth to you? state? national?
After students make their decisions, ask some to share their amounts on the board. Then, provide them with the tax rates for your locality – local and state (the federal marginal tax rate for $60,000 is 30%, or $18,000). Ask student about the differences between their answers and the actual tax rates:
- Are you surprised that the amount they were willing to pay in taxes is so much less than what is required?
Tell students this is why the government mandates tax payments. If we left it to individuals to decide how much to pay, we wouldn’t have enough money to provide all of these goods and services.
Have students complete Tic-Tac-Taxes Game with a partner. Have students print their results.
Have students complete the Taxing Activity worksheet.