Taxes+are+they+fair?

In protests in New York City and other cities, demonstrators are demanding that we "tax the rich." It's a teachable moment for a discussion about taxes: why we have them, who pays how much, and whether the current rates are fair. When President Obama stated a few weeks back that the wealthiest Americans, many of whom are taxed at remarkably low rates, should bear part of the burden of reducing the budget deficit, he was accused of waging class warfare. The term "class warfare" was traditionally used by socialists to describe a struggle by workers to challenge capitalism and create a more equal society. What President Obama proposed would instead level out the playing field somewhat by expecting the very rich to pay the same overall tax rate on their earnings as other taxpayers. President Obama called his plan the Buffett Rule, after Warren Buffett, the billionaire investor who has pointed out repeatedly that the wealthiest Americans pay a smaller percentage of their earnings in federal taxes than the middle and low-income people. Buffett illustrates this by pointing to his secretary who pays a higher tax rate on earnings than he as a billionaire does. The top U.S. tax rate on regular income (wages) is 35%. Most very rich Americans get most of their income not from wages, however, but from selling stocks and other financial maneuvers. This income, called "capital gains," is taxed at only 15%. In the following lessons, students explore the question of taxes, and discuss opposing views on tax fairness.

You will: Social and Emotional Skills: > **TAXES: Who pays what?**
 * Objectives **
 * Explore why we pay taxes and the tax rates various Americans pay on their earnings;
 * Look at the pros and cons of President Obama's proposed "millionaire's tax," and discuss them as a group
 * Considering different perspectives on the same issue
 * Conflict resolution skills
 * Critical thinking skills
 * 

"Tax the rich!" is a demand voiced often by protesters involved in the "Occupy Wall Street" protest in New York City - and others like it around the country. The protesters believe that our whole society is suffering because of the growing disparity between rich and poor. They also charge that this disparity is undermining our democracy, because the very rich are able to use their money to get candidates elected who will vote in their interests. Meanwhile, Republicans are arguing that we should be cutting taxes further - and that all efforts to reduce our federal deficit should focus on cuts in public services and public workers' jobs, not increases in tax revenue. On September 8, 2011, President Obama proposed the "American Jobs Act," which includes some new spending on things like school repair, as well as $240 billion in tax cuts to small businesses and a temporary payroll tax cut. He proposed to pay for the plan with a combination of spending cuts to programs including Medicaid, Medicare, and the military --and by raising taxes for the very wealthy. (Taxes would be raised by closing some tax loopholes for the wealthy, increasing the capital gains tax, and allowing some of the Bush-era tax breaks for the rich to expire.) <span style="font-family: Verdana,Arial,Helvetica,sans-serif;">He proposed what he called "the Buffett Rule," after Warren Buffett, the billionaire investor. Buffett has pointed out repeatedly that the wealthiest Americans pay a smaller percentage of their earnings in federal taxes than middle- and low-income people. Buffett illustrates this by pointing to his secretary who pays a higher tax rate on earnings than he as a billionaire does. <span style="font-family: Verdana,Arial,Helvetica,sans-serif;">This happens because very rich Americans typically get most of their income not from wages, but from selling stocks and other financial maneuvers. And this income, called "capital gains," is taxed at only 15%. The top US tax rate on regular income is 35%. <span style="font-family: Verdana,Arial,Helvetica,sans-serif;">Republicans responded that the president was engaging in "class warfare" against the rich. "Veto threats, a massive tax hike, phantom savings and punting on entitlement reform is not a recipe for economic or job growth - or even meaningful deficit reduction," charged Senate Republican leader Mitch McConnell. <span style="font-family: Verdana,Arial,Helvetica,sans-serif;">So should the rich pay more in taxes? Or not? How fair is our tax system? <span style="font-family: Verdana,Arial,Helvetica,sans-serif;">Assessing who pays how much in taxes is actually no simple task. In general, our federal income taxes are progressive, meaning that rich people pay a higher percentage of their income in taxes than poor people. But there are exceptions, including the capital gains tax, which enables many very wealthy people to pay less taxes on earnings. And there are many taxes besides federal, state, and local - including sales taxes, which are quite regressive (that is, low-income people must pay a much higher percentage of their income on sales taxes than high-income people).

<span style="font-family: Verdana,Arial,Helvetica,sans-serif;">**1.** What are some ways we could help reduce the deficit?

<span style="font-family: Verdana,Arial,Helvetica,sans-serif;">**2.** Which of these ways are Democrats arguing for?

<span style="font-family: Verdana,Arial,Helvetica,sans-serif;">**3.** Which of these ways are Republicans arguing for?

<span style="font-family: Verdana,Arial,Helvetica,sans-serif;">**4.** Explain the Buffett Rule.

<span style="font-family: Verdana,Arial,Helvetica,sans-serif;">**5.** What is progressive (and regressive) taxation? Provide examples from the article.