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TEF Lessons for Members and Citizens Lesson 4. The Role of Taxes in Society. Objective:. Participants will discuss the purpose and uses of taxes, their role in society, and characteristics of good tax policy. As a group can we agree that we will:.

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The Role of Taxes in Society

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TEF Lessons for Members and Citizens

Lesson 4

The Role of Taxes in Society


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Objective:

Participants will discuss the purpose and uses of taxes, their role in society, and characteristics of good tax policy.


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As a group can we agree that we will:

  • Respect and value differences of opinions and varying levels of knowledge

  • Be attentive


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What do we get

for our tax dollars?


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The Angry

Taxpayer!


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  • What does this story mean to you?

  • We’ve just talked about many benefits we receive from tax dollars, yet people want to have lower taxes and often have negative feelings about paying taxes. Why?


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  • People may not be aware of all the services and things they use paid for with tax dollars.

  • Cutting taxes is politically popular.

  • People may not agree with how their tax dollars are spent.


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“Taxes are the price we pay for civilization.”

—Oliver Wendell Holmes


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Common Ground

What is the role of taxes

in our society?


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Reflection on Common Ground

  • What did you see or hear during this activity?

  • How did you feel?


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3 TAX STRUCTURES

  • Progressive tax = one that takes a larger share of income as the taxpayer’s income rises.


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U.S. Federal Tax FilersEffective Tax Rate by Adjusted Gross Income Level, 2007

IRS, “Table 1. All Returns: Sources of Income, Adjustments, Deductions and Exemptions, by Size of Adjusted Gross Income, Tax Year 2007”; David Cay Johnston, “Tax Rates for Top 400 Earners Fall as Income Soars, IRS Data,” http://www.tax.com/taxcom/features.nsf/Articles/0DEC0EAA7E4D7A2B852576CD00714692?OpenDocument; http://www.irs.gov/taxstats/indtaxstats/article/0,,id=133414,00.html


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U.S. Federal Tax FilersEffective Tax Rate by Adjusted Gross Income Level, 2007

IRS, “Table 1. All Returns: Sources of Income, Adjustments, Deductions and Exemptions, by Size of Adjusted Gross Income, Tax Year 2007”; David Cay Johnston, “Tax Rates for Top 400 Earners Fall as Income Soars, IRS Data,” http://www.tax.com/taxcom/features.nsf/Articles/0DEC0EAA7E4D7A2B852576CD00714692?OpenDocument; http://www.irs.gov/taxstats/indtaxstats/article/0,,id=133414,00.html


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3 TAX STRUCTURES

  • Progressive tax = one that takes a larger share of income as the taxpayer’s income rises.

  • Regressive tax =

    one that takes a smaller share of income as the taxpayer’s income rises.


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Regressive Tax Example: The State & Local Tax System

Source: “Who Pays? A Distributional Analysis of the Tax System in All 50 States,” 3rd Edition. Institute on Taxation and Economic Policy, 2009.


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3 TAX STRUCTURES

  • Progressive tax = one that takes a larger share of income as the taxpayer’s income rises.

  • Regressive tax = one that takes a smaller share of income as the taxpayer’s income rises.

  • Flat rate tax = income tax would go up exactly in proportion to income. However, what is often advocated as a flat tax is to tax everyone at the same rate, such as the sales tax.


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The Sales Tax: Neither Flat nor Fair

  • The sales tax is actually regressive.

  • As your income goes the % of income

    you spend on taxes goes

  • A sales tax provides a skewed burden on the poor and middle class who have to spend most all of what they earn, much of it on things that are subject to sales tax.


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Is the SAME always FAIR?


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3 TAX STRUCTURES

  • Progressive tax = one that takes a larger share of income as the taxpayer’s income rises.

  • Regressive tax = one that takes a smaller share of income as the taxpayer’s income rises.

  • Flat rate tax = income tax would go up exactly in proportion to income. However, what is often advocated as a flat tax is to tax everyone at the same rate, such as the sales tax, which is neither flat nor fair.


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Good Tax Policy:

  • Is progressive (at least not regressive)

  • Is broad based

  • Does not tax income from work more than income from investments.

  • Doesn’t allow special interests to avoid paying their fair share of taxes


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February 25, 2010

[T]he exemption allowed buyers of big boats to pay a small fee in lieu of sales taxes and shave as much as $30,000 off the purchase of a $500,000 boat. Yachts are treated like baby formula for the poor – exempt from state and local sales tax.

Missouri boats that qualify for the exemption have been given names such as “Tax Haven” and “Greedy Bastard,” The Star reported.

The bills failed.

“Bills Would Close Missouri’s Yacht Loophole,” Mike McGraw, Kansas City Star, 2/25/2010, available at primebuzz.kcstar.com, accessed 4/20/2010: (http://www.google.com/url?sa=t&source=web&ct=res&cd=2&ved=0CAsQFjAB&url=http%3A%2F%2Fprimebuzz.kcstar.com%2F%3Fq%3Dnode%2F21543&ei=g8nNS4TXLcP7lwfqvvShCw&usg=AFQjCNGkXhs5p_Op_mO9rxMiY8TjpTTzuw&sig2=ppNhg3XRulh8bJ8VSF8sTQ); also see Mike McGraw, “Missouri Compromise: Cut Schools, but Don't Tax the Yacht,” available at:

http://www.mcclatchydc.com/2010/02/21/87288/missouri-compromise-cut-schools.html


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Alabama Senate Bill 144 Film Project Tax Incentive Bill

  • Efforts by the Alabama Education Association to stop funding erosion have resulted in approximately $2 billion a year staying in education. This amount is 1/3rdof all state education funding in Alabama.

  • As education costs continue to rise, we must protect the funds before they are given away to special interest.


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Schools are being held accountable for results…

When they lack the

capacity to

deliver those results…

Accountability

When funding is

inadequate and

inequitable…

When tax

structures are

out of sync

with the

economy…

School Capacity

School Funding

And not everyone is aware.

MAKE THE TEF CONNECTION

Economy & Tax Structure

Public Support


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REFLECTION

  • What stands out in your mind from today’s lesson?

  • What does this mean for you? For your students?

  • How might you act on this knowledge or awareness?


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TEF Tools and Resources

TEF Website: http://www.nea.org/tef

Publications

State affiliates in TEF Action

1

2

State-Specific

Data Sources

3

  • Studies supporting TEF concepts:

  • The Effects of State Public K-12 Expenditures on Income Distribution

  • K-12 Education in the U.S. Economy

  • Protecting Public Education from Tax Giveaways to Corporations.

  • School Funding, Taxes and Economic Growth

  • TEF Series

  • Why invest in education makes sense:

  • Enriching Children, Enriching the Nation

  • Corporate abuse:

  • The Great American Job Scam - corporate tax dodging and the myth of job creation.

  • Your Tax Dollars At Work…Offshore - foreign outsourcing firms are capturing state government contract.

  • No More Secret Candy Store - A grassroots guide into investigating corporate subsidies.

States Facing Budget Shortfall – Center for Policy and Budget Priorities (CBPP) reports state fiscal profiles.

State-by-state tax news and policy analysis provided by the Institute of Economics and Policy Analysis (ITEP).

Economic Policy Institute’s (EPI) new report analysis rank states by overall unemployment as well as the change seen since the start of the recession in December 2007.

Enriching Children, Enriching the Nation show state returns in budget, salary, crime reduction by investing in Pre-K thru 12.

Find out how much Wal-Mart is costing your state in subsidy deals, healthcare cost, and property tax appeal appeals.

Combined Reporting, How Does Your State Stack-Up? Institute on Taxation and Economic Policy (ITEP) This reporting requires multi-state corporations to report the income earned by both the parent corporation and all of its subsidiaries and to determine their income tax liabilities on that basis.

Good Jobs First state-by-state corporate subsidy websites.

  • A few examples…

    • This video address from Alabama EA President, John Wright.

    • Alabama EA sheds light on corporate tax avoidance in Alabama

  • Detroit News, Friday, July 25, 2008

    • MEA Press Release: Drop-outs One Too Many, April. 4, 2008

    • Honolulu Advertiser, Dec, 2006

    • Honolulu Advertiser, Feb. 2007

    • Iowa State EA News ArticleKentucky EA - School Funding Statement.

  • Michigan’s Business Tax Incentives:

  • A study commissioned by MEA and NEA to improve the quality of the debate on business tax incentives.

  • Mississippi EA op-ed piece.

  • State Affiliate TEF Websites: Colorado, Illinois, Michigan, Mississippi, New Jersey, Oklahoma


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TEF Tools and Resources

TEF Website: http://www.nea.org/tef

Customizable Tools

Introducing a

New TEF

Interactive Tool

Other

Useful Links

4

5

6

  • Community Organizing

  • Business Outreach

  • Sample Political Action Tools

  • Corporate Legislation

  • TEF Model Legislation

NEA Information on establishing a social networking site to use as an organizing tool.

Others are: (http://www.ning.com/ ) and (http://www.groupsite.com/)

http://www.faireconomy.org/tfoc to locate your state’s tax fairness organizing collaborative. These groups are located in 21 states.

www.nea.org/tef


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Other Resources

On Taxes…

Funding for Schools

On Economic Policies

7

8

9

U.S. PIRG on Countdown. Olbermann talks about U.S. PIRG's report "Tax Shell Game.”

Free Lunch, Corp Welfare, Bill Moyers and David Cay Johnston (9:49)David Cay Johnston - A History of Government Subsidies (3:08)David Cay Johnston - Are Government Subsidies Unfair? (4:43)David Cay Johnston - A Moral Argument for Progressive Taxes (3:04)

Videos

PBS Now, "Taxing the Poor" ((26.03)

Wal-Mart Subsidies(7:48)

Warren Buffett's Tax Rate is Lower than His Secretary's (4:39)

TAXES: Warren Buffett - Rich Taxed Too Little, Poor Too Much (5:17)

Eye To Eye With Katie Couric: Buffett's Tax Code (CBS News) (1:40)

Videos

Access Quality Education: School Funding Litigation A National Network of Advocates Involved in Education Finance Litigation,

Abbott vs. Burkeis the New Jersey Supreme Court ordered a set of education programs and reforms widely recognized to be the most fair and just in the nation.


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“Our lives begin to end the day we become silent about things that matter.”— Martin Luther King, Jr.

The Call to Action!


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