WEALTH & TAXES: WHAT'S FAIR?
Students consider opposing views about taxes and wealth, analyze charts about wealth distribution, and decide how they think wealth should be distributed.
By Marieke van Woerkom
To the teacher:
"We can either settle for a country where a shrinking number of people do really well, while a growing number of Americans barely get by, or we can restore an economy where everyone gets a fair shot, everyone does their fair share,"President Obama said in his State of the Union address on on January 25 2012.
Taxes and tax fairness have been one of the hottest issues in the 2012 election so far. As Reuters noted, "Democrats have hammered Republicans in Congress for supporting tax breaks that favor the wealthy while Republicans staunchly oppose tax hikes, even on the richest Americans." Today's lesson plan will look at how the issue of taxation plays into wealth distribution in the U.S.
- Look at how the current tax system plays into unequal wealth distribution
- Assess President Obama's views and Republican views on taxation
Explore the issue of wealth distribution in the US by analyzing charts about how people think wealth is distributed, how it is actually distributed and how they'd like it to be distributed.
- Today's agenda on chart paper or on the board
- Colored paper - yellow, orange, red, light blue, dark blue
- Paper clips, coins, skittles or something else to use as currency/wealth
Charts printed out or projected onto the smart board
Ask for a quick show of hands of students who:
- Are familiar with the names Romney, Gingrich, Santorum and Paul (ask who they are)
- Have been following the Republican primaries
- Know that Newt Gingrich challenged Mitt Romney to release his tax returns (ask if they know what happened then)
- Know who won the primary in South Carolina (ask who)
- Know who won the primary in Florida (ask who)
- Know where the candidates are campaigning right now (ask where)
Check agenda (1 minute)
Explain that in today's lesson you'll be looking at a key campaign issue for both Republicans and Democrats: the issue of wealth distribution in the US and how that distribution is affected by our tax policies.
Income Inequality in the US
Ask your students to read the following from The Economist Online as an introduction to today's lesson:
Of all the many banners being waved around the world by disgruntled protesters from Chile to Australia the one that reads, "We Are the 99%" is the catchiest. It is purposefully vague, but it is also underpinned by some solid economics. A report from the Congressional Budget Office (CBO) points out that income inequality in America has not risen dramatically over the past 20 years - when the top 1% of earners are excluded. With them, the picture is quite different.
The causes of the good fortune of those at the top are disputed, but the CBO provides some useful detail on that too. The biggest component of the increase in after-tax income for the top one percent is "business income" as opposed to income from labor or investments (though admittedly these things are hard to untangle). Whatever the cause, the data are powerful because they tend to support two prejudices. First, that a system that works well for the very richest has delivered returns on labor that are disappointing for everyone else. Second, that the people at the top have made out like bandits over the past few decades, and that now everyone else must pick up the bill. Of course it is a little more complicated than that. But this downturn ought to test the normally warm feelings in America of the 99% towards the 1%.
Debrief the reading by asking some or all of the following questions:
- According to the reading, what has happened to income inequality in the US in the past 20 years?
- What are the two prejudices the reading talks about?
- Discuss the definition of prejudice. Remind your class that the word contains "pre" and "judge" and that it means "(1): a preconceived judgment or opinion (2): an adverse opinion or leaning formed without just grounds or before sufficient knowledge," according to Merriam Webster. Based on this definition, are the points made in the reading really prejudices?
- What does the reading say about how the top 1% of earners have done over the past 20 years?
- What does it say about how the other 99% of earners have done over the past 20 years?
- Why does the reading end with the sentence "But this downturn ought to test the normally warm feelings in America of the 99% towards the 1%"?
Why do you think this is an important issue in the 2012 election?
Depending on the time available, engage the class in either the pair activity below, or in the small group activity that follows.
Talk in pairs (option 1):
Wealth Distribution in the US:
Ask students to find a partner to work with in this next activity. Distribute (or project on the smartboard) the following chart for students to look at and discuss in their pairs.
Bring students back to the large group. Ask some or all of the following questions:
- What did you discuss in your pairs?
- What does this chart tell you about distribution of earnings in the US?
- Was there anything that surprised you?
- What is the breakdown used in this chart? Do you think that is useful?
- What does this chart tell you about the 99%?
- What does this chart tell you about the 1%?
How does this chart relate to the discussion of the paragraph we read earlier today?
Small group work (option 2):
Redistribute our wealth
Break students into small groups of five or six. Give each group five sheets of colored paper with the following headings:
Yellow paper heading: Highest (top) 20% of wealth in the US
Orange paper heading: Second highest 20% of wealth in the US
Red paper heading: Middle 20% of wealth in the US
Light blue paper heading: Second lowest 20% of wealth in the US
Dark blue paper heading: Lowest (bottom) 20% of wealth in the US
Next, distribute 100 units of "wealth" to each group. This might be in paper clips, skittles, plastic chips, coins, monopoly money, or whatever else you have available.
Explain that in their groups, students will now distribute their 100 units of wealth according to how they think wealth should be distributed in the US, dividing the population into the five percentiles represented by the five different colors of paper they were given. Ask students to lay the papers down on desks and place the wealth units on top of the sheets to represent how they think wealth should be distributed. How many units of wealth does the top 20% of the country own? How many units of wealth does the bottom 20% of the country own? And how much do the three categories in between own?
When students are done, ask them to walk around the room to see how other groups distributed their "wealth."
Back in the big group, ask students some or all of the following questions:
- What was the work in their small groups like?
- Was it hard to come to an agreement on how "wealth" should be distributed in the US?
- What did they notice about how other groups distributed their "wealth"? Were their similarities/differences?
Next, distribute (or project on the smartboard) the following chart for students to look at and compare to the way they distributed "their" wealth in their small groups.
Ask students some or all of the following questions:
- Was their distribution comparable to any of these banners? Which one?
- Turn to the actual distribution of wealth (top banner), and ask: What do students think about this? Are they surprised?
- Ask students to think about how many units they would have to move (and where) in their group to make it align with the actual wealth distribution in the U.S., according to this chart.
- Now turn to the last banner (how Americans think wealth should be distributed): What do they notice when comparing their group's wealth distribution to the chart?
- Do they agree with this distribution? Why/why not?
Based on this activity, ask students if they think wealth distribution should be an important issue in the 2012 elections. If they think it should be, what steps might they take to raise the issue?
Wealth Distribution / Tax Distribution
Distribute (or project on the smartboard) the following image for students to look at. Either read out loud or have students read the paragraphs below about taxation and the 2012 elections:
Taxes have been a major issue in the 2012 elections. Reuters put it this way: "Democrats have hammered Republicans in Congress for supporting tax breaks that favor the wealthy while Republicans staunchly oppose tax hikes, even on the richest Americans …. "
In his State of the Union address in January, President Obama said: "We can either settle for a country where a shrinking number of people do really well, while a growing number of Americans barely get by, or we can restore an economy where everyone gets a fair shot, everyone does their fair share."
One way President Obama says he wants to address this issue is through what he describes as a fairer tax system. In the State of the Union address he said:
"Right now, our most immediate priority is stopping a tax hike on 160 million working Americans while the [economic] recovery is still fragile. Right now, we're poised to spend nearly $1 trillion more on what was supposed to be a temporary tax break for the wealthiest 2 percent of Americans. Right now, because of loopholes and shelters in the tax code, a quarter of all millionaires pay lower tax rates than millions of middle-class households. Right now, Warren Buffett [one of the world's richest investors] pays a lower tax rate than his secretary.
"We need to change our tax code so that people like me, and an awful lot of Members of Congress, pay our fair share of taxes. Tax reform should follow the Buffett rule: If you make more than $1 million a year, you should not pay less than 30 percent in taxes. And my Republican friend Tom Coburn is right: Washington should stop subsidizing millionaires. In fact, if you're earning a million dollars a year, you shouldn't get special tax subsidies or deductions. On the other hand, if you make under $250,000 a year, like 98 percent of American families, your taxes shouldn't go up. You're the ones struggling with rising costs and stagnant wages. You're the ones who need relief."
Republicans oppose raising tax rates for the wealthy. In their reply to Obama's State of the Union address, Indiana Governor Mitch Daniels said, “It’s absolutely so that everyone should contribute to our national recovery, including of course the most affluent among us. There are smart ways and dumb ways to do this: the dumb way is to raise rates in a broken, grossly complex tax system, choking off growth without bringing in the revenues we need to meet our debts. The better course is to stop sending the wealthy benefits they do not need, and stop providing them so many tax preferences that distort our economy and do little or nothing to foster growth." Daniels also called for "a dramatically simpler tax system of fewer loopholes and lower rates."
- What do you think about President Obama's view on taxation?
What do you think about Mitch Daniels' view?
Explain that there is obviously much more to this issue than we were able to cover in today's lesson. Ask a few volunteers to share one thing they learned today or one thing they have more questions about.
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