The Government and Taxes: Last time we were together, we looked at the "numbers". Today, we'll try to make some sense of them...
We can talk a little bit about Naked Economics Chapter 7, "Financial Markets." We can also look at anything interesting you found in the various websites from last Tuesday.
- Office of Management and Budget: Fiscal Outlook
- The National Debt: Here's the Debt Clock.
- Grandfather Economic Report: Michael Hodges had put together this large site concerned with presenting information on the national debt. You're directed to the portion of the site concerning economic issues, but you may want to look around further.
On to the new stuff for today...
Taxes: There's an old saying that, "there's nothing certain but death and taxes." Today, we'll spend some time looking at the less depressing half of that adage... Hopefully, you've been convinced by now of the economic necessity of some form of taxation. (If not, contemplate life without roads, schools, police, and national defense for a while...)
So, if we work from the common assumption that taxes are a necessity, there remain several questions:
- Who should be taxed?
- What should be taxed?
- How (at what rate) should the tax be levied?
- What should happen to the money collected from the tax?
Let's start our look at some internet resources with this... Taxpolicy.com invites you to "Build Your Own Tax Policy." It asks you a series of questions and then sketches out your broad views on taxes as derived from those answers.
The history of taxation: Of course, the history of taxation is long. If you want more information than you can ever use, consult "The History of Taxation" at the "Taxworld" website.
Types of taxes: There are several broad categories of taxes. Economists generally classify taxes as progressive, regressive, or proportional. (Another type of tax is called a "head" tax. Everyone pays the same amount.) Let's make sure we understand the differences.
Discuss: Which type of tax do you think is most fair? Are there any that you strongly oppose? Is the sales tax regressive?
The Federal Income Tax: This, of course, is the "big one". It has been in place since 1913, and it is the single largest source of governmental revenue.
One of the legacies of the Reagan years was a period of tax reform. Now, there are six federal income tax rates: 10 percent, 15 percent, 25 percent, 28 percent, 33 percent, and 35 percent.
For married couples, the 15 percent rate currently applies to taxable income up to $63,700, whereas the 25 percent rate applies to taxable income between $63,700 and $128,500. Here are the more complete 2007 federal income tax rate schedules.
Discuss: Do you think it is fair to tax higher levels of income at a higher rate? Would you like to see a more or less progressive income tax?
Of course, Minnesota gets its share of income as well. You can learn more about that at the "Minnesota Department of Revenue Home Page." You can also browse around here to find a copy of the tax forms you would need to file as well.
For comparisons, here are State Income Taxes for the rest of the nation.
The "Flat" Tax: One of the "new" movements in tax reform has been the call for a flat tax. Here are two articles to consider...
- Christian Science Monitor: "US already moving toward a flat tax."
- Economist: "The flat-tax revolution."
Current Events - Articles jigsaw - We'll give you one of four articles and ask you to be reading to discuss it tomorrow.
Homework for next session - Tuesday, December 2nd
Please have your Blog Entry #6 ASAP. (I got that posted late, so we'll give you a day or two to get that done.)
I'll be asking you to read Chapter 10, "The Federal Reserve," out of order for Wednesday's class. You could also take care of that.
Please also read the handout, "The Mythology of Deficits," for tomorrow.
I'd like you to read Naked Economics Chapter 8, "The Power of Organized Interests," for Thursday's class.
