Content Tagged: tax

Panama Papers Political Cartoons

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June 6, 2016

The political cartoons included in this blog are selected as tools to teach about public policy issues. Their inclusion does not in any way constitute an endorsement by Teachers College, Columbia University, of their point of view.

Political cartoons can be a powerful way to teach and talk about public policy issues in the classroom. They engaging, often funny, and they teach very complex ideas in a quick and intuitive way. We are so convinced of the value of political cartoons that, in addition to including them in many of our blogs, we feature posts that are all cartoons.

Using cartoons presents an opportunity to teach students media literacy, including the ability to detect point of view or bias. As a sequence, we strongly encourage students to study the cartoon carefully, analyze the specific context of the cartoon, and determine the cartoonist’s point of view. See the blog post of October 8, 2013 for a guide to using the political cartoons we have selected. The Library of Congress also has a a very useful Cartoon Analysis Guide.

 

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Taxation & the Panama Papers

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June 6, 2016

An article yesterday in the New York Times did a pretty good job outlining the issue with the so-called “Panama Papers”.  In general, in April, the papers were leaked from a law firm in Panama, and details assumed tax-evasion tactics from at least 2400 US clients, by setting up allegedly bogus companies.  There’s even a basic overview of how the company, Mossack Fonseca, worked with clients.

Image from bbc.com

Although setting up offshore companies is perfectly legal in the United States, the leaked documents show that Mossack Fonseca worked extra hard to show how to evade US income tax law.  For example, they would set up said company with an unrelated, paid person to be the proxy, hiding the true US owner.

I find this to be a great, current, real-life example to tie to UFR Lesson 1.4 on Taxation and the National Debt.  Although the focus of the lesson is a tie to the debt, it is a terrific overview of our taxation system, and the essential dilemma pulls it all together:  “Is there a fair and efficient way to fund and maintain the public services we want?”.  Have students research the Panama Papers in more depth and ponder:  what is “fair”?

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Murray-Ryan Budget Cartoon Roundup

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December 27, 2013

 

The advent of the 2013 Murray-Ryan budget agreement has brought a great opportunity for political cartoon analysis in the classroom.  The October 13 blog outlines some great ways to bring political cartoons to students through authentic, critical analysis.  Close reading, followed by asking what students see and think is happening, and then asking about the author’s point of view leads to a thorough analysis!

Michael Ramirez, 2013

Nate Beeler, 2013

Adam Ziglis, 2013

Mike Luckovich, 2013

Steve Sack, 2013

Nate Beeler, 2013

 

 

 

 

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The Buffett Rule and Obama’s 30% Threshold

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April 13, 2012

The Buffett Rule has become a major talking point for politicians and economic specialists over the past few weeks. However complex the rule may be, Jeanne Sahadi for CNN Money provides a few basics on what you might want to know in her April 10th article. So what is the Buffet Rule exactly? The Buffett Rule, named after investor Warren Buffett, would ensure that millionaires and billionaires pay a higher percentage in their federal taxes. President Obama believes that the threshold should be no lower than 30%. According to the article:

To measure whether a millionaire is paying at least 30% of his income in taxes, the bill would take into account what the individual paid in federal income and payroll taxes plus the new 3.8% Medicare surtax set to take effect in 2013.

A big question about the Buffett Rule is how much money it would bring the federal government. From figures developed by the Joint Committee of Taxation, the rule would generate $47 billion over ten years. That said, Sahadi notes that many believe that it would complicate the tax code and do little to lower the deficit.

Teachers can use this article to further analyze the Buffett Rule with their students. Some questions to consider are: Should the threshold proposed by President Obama be more or less than 30%? Does cutting the deficit in such a small manner (billions instead of trillions) even matter? Teachers can also work on developing a tax code with their class that is more “fair” and “equal.” They should think about this in terms of the different people being taxed and what their possible reactions might be to paying varying percentages.

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Are Tax Breaks a Good Thing?

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April 2, 2012

Which costs the federal government more: a $2,100 check from Uncle Sam or a tax break worth $2,100?

Jeanne Sahadi for CNN Money begins her article about the national government’s “hidden” spending by asking this question. In reality, $2,100 is the same cost for both, but the tax break does not count towards the federal budget. Fiscal experts are troubled by these tax breaks because they could end up causing the government to lose billions of dollars. The government, however, uses these breaks as ways to get certain goals accomplished without spending “physical” money. Sahadi provides two examples:

Congress wants to foster homeownership, so it lets homeowners deduct their mortgage interest. Lawmakers want to reduce greenhouse gas emissions, so they offer a tax credit to companies that produce biofuels such as ethanol or biodiesel.

 

If these tax breaks were considered government spending, a major topic of discussion for politicians and presidential candidates, then the government’s spending as GDP would be much higher. According to Sahadi, other unreported expenditures and fees help the government maintain a lower percentage of GDP spending. The article states that, “In all, if they were also recategorized in the budget, government spending in 2007 would have to be reported as 25.4% of GDP — or a nearly a third more than advertised.”

Reevaluating the tax code would allow policymakers to see how much the government actually spends. Donald Marron, director of the Tax Policy Center, asserts that limiting tax cuts would increase the revenue of the federal government, hopefully bringing in billions of dollars. Nonetheless, a debate on the tax breaks must occur because many passed breaks go unevaluated after their acceptance. Marron states, “hidden spending should get the same scrutiny — and inspire the same enthusiasm for cuts — as the spending on entitlements, domestic programs, and defense that is targeted by today’s fiscal hawks.”

Teachers can use this article to discuss tax breaks and the many different types that exist. Possible areas to investigate: environment, industry, real estate, nongovernmental organizations (NGOs), etc. A possible activity is to research the presidential candidates tax plans and see the different areas in which they propose tax breaks. Students could discuss whether or not these breaks would be popular if citizens had to pay for them outright.

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New Plan to Reduce Deficit Continues

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March 28, 2012

A proposal closely resembling the Simpson-Bowles Plan from the 2010 deficit-reduction commission continues to move forward in Congress, reports Damian Paletta for the Wall Street Journal.  Though many expect the plan to fail any vote in Congress, it signifies the possibility of new bipartisan effort.

Reps. Steve LaTourette (R., Ohio) and Jim Cooper (D., Tenn.), have sponsored the new bill that plans “to reduce the federal budget deficit by more than $4 trillion over 10 years through a combination of spending cuts and tax increases,” Paletta explains.  This plan joins a number of budget proposals made in the past few weeks, though this one is the first with any bipartisan support.

This proposal cuts the deficit in a number of ways.  First, it would lower tax rates while simultaneously eliminating or limiting tax breaks.  These changes would account for almost $1 trillion in deficit reduction over 10 years.  With regards to social insurance, the plan would set a limit on the long-term growth of federal health care spending, as well as make large changes to Social Security and other entitlement programs.  The plan also would ask congressional panels to make cuts to federal programs that would amount to $300 billion.

Paletta reports that, thus far, at least three Republicans and four Democrats in the House support this plan.  This bipartisan support is one instance of a new effort from both parties to negotiate the budget ahead of the November elections.  Even so, both the White House and the Republican leadership have offered alternatives to this plan. The projections of the plans are given the graph below.

The Republican budget proposal, presented by Rep. Paul Ryan (R., Wis.) last week, restructures Medicare and Medicaid and does not include any tax increases.  Mr. Ryan, commenting on both plans, said: “I applaud my colleagues for working in a bipartisan manner in an effort to address Washington’s fiscal crisis.  Unfortunately, the proposal fails to confront the key driver of the debt: the explosive growth of government spending on health care.”

A White House official, in response to the Ryan Budget, said that it “protects massive tax cuts for millionaires and billionaires… [it was] understandable that some members of the Republican Party appear to want to take a more reasonable approach.”

Bringing the Article into Your Classroom

This article raises a number of interesting questions to discuss with your students: First, what do they think about the newest, bi-partisan budget proposal? Second, why do they think the Republican Party leadership will not support a plan proposed by House Republicans (with Democrats)? In the same vein, why has the White House given its own proposal, rather than supporting the Democrats who have helped create this plan?  As students, do they support one plan over another? Why?

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Obama’s New Payroll Tax Law

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February 24, 2012

According to a CNN article by Tom Cohen, Obama signed a law on Wednesday that would extend the payroll tax cut, unemployment benefits, and prevent cuts in payments to Medicare doctors. With Obama’s signing, these topics are now sorted out for the remainder of the year. President Obama and his administration also released a plan that would lower the corporate tax rate as well as reduce the number of tax breaks businesses can receive. His plan lowers the corporate tax rate from 35% to 28% and outlines a proposal that would follow the “Buffet Rule,” a rule that would tax people that make an annual income of over $1 million to pay at least a 30% tax rate. Political strategists view Obama’s tax plan as a means to distinguish himself from the Republican nominee and as the groundwork for a campaign against a “do-nothing” Congress.

The extension of the payroll tax cut lowers the percentage workers pay into Social Security and also plays a key role in Obama’s economic recovery plan. From the article:

The roughly $100 billion measure, a key part of Obama’s economic recovery plan, has reduced how much 160 million American workers pay into Social Security on their first $110,100 in wages. Instead of paying 6.2% had it lapsed, they’ll be paying 4.2%, a break worth about $83 a month for someone making $50,000 a year.

Teachers can use this article and past blogs to discuss how the tax rate will influence the reduction of the federal deficit and the possible implications it could have on funding federal programs. A class debate would be an excellent idea for students to deliberate on the corporate tax rate and the positive/negatives for Obama’s lowering of it. Students could then write a short paper/essay with their opinion and use evidence from the debate to support their claim.

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Campaigning and Cutting the Deficit

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February 23, 2012

In less than one year, this country will vote to elect a new President.  As the Republican candidates spar in frequent debates, campaign advertisements, and other modes of publicity (as well as through the formal primary elections), Obama’s campaign team also has entered the public eye.  Rather than differentiating Obama from the Republican candidates through his stance on social issues, the Obama campaign has decided to look at which candidate would cut the deficit the most, reported Devin Dwyer for ABC News.

The Obama campaign recently released a memo that analyzed the budget proposals of Mitt Romney and Rick Santorum, the two frontrunners in the Republican primaries.  Dwyer reports:

Obama aides, citing studies from the Tax Policy Center and Center on Budget and Policy Priorities, conclude Romney’s public budget proposals would add $175 billion a year to the deficit.  They claim his proposed tax cuts and increased defense spending would not be adequately offset by as yet unspecified spending cutes the size of which are deemed ‘simply not plausible.’  The memo also claims Santorum’s plan would add $990 billion to the deficit in 2015.

In contrast to this memo’s conclusions, both Romney and Santorum have stated that they planned to cut government spending as President.  In an email to ABC News, Dwyer reports, Romney campaign spokeswoman Andrea Saul “did not directly refute” this memo’s analysis.  Rather, she highlighted the fact that, during the Obama presidency, the deficit has grown by over $5 trillion.

Bringing This Article into the Classroom

Dwyer’s article points to the fact that Obama’s campaign has decided to attack both Romney and Santorum for their proposed budgets and their effect on the federal deficit.  In a class discussion, you may ask your students why they think the Obama campaign is choosing to focus on the federal deficit as a campaign strategy rather than simply focusing on social issues?

This article also lends itself to a discussion on the different approaches Republicans and Democrats take to taxing and spending.  By examining the general philosophical differences of small vs. big governments, students will have a greater appreciation for why the Obama campaign sees their memo as an effective attack on the Romney and Santorum campaigns.

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Is Government Debt Analogous to a Family Mortgage?

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February 1, 2012

Paul Krugman, a 2008 Nobel Prize winner in Economics, wants you to stop comparing the federal debt to the debt of an individual.  In a recent New York Times op-ed piece, Krugman reframes this issue to explain why he believes that the federal debt is not the most urgent issue this government faces.

Krugman begins by pointing out that, despite the fact that the unemployment rate has been “disastrously high” the past two years, Congress has focused its energy on reducing the budget deficit.  Krugman lambasts both Congress and the economists with whom Congress has been consulting:

When people in D.C. talk about deficits and debt, by and large they have no idea what they’re talking about – and the people who talk the most understand the least.  Perhaps most obviously, the economic ‘experts’ on whom much of Congress relies have been repeatedly, utterly wrong about the short-run effects of budget deficits.

Krugman goes on to point out what specifically these economists have gotten wrong: in the short term, they claimed that the budget deficit would lead to increasing interest rates, though interest rates actually have dropped over the course of Obama’s presidency.

In the long term, Krugman claims, governments do not have to pay back their debt in the way individuals must pay back personal debts.  He explains: “An over-borrowed family owes money to someone else; U.S. debt is, to a large extent, money we owe to ourselves.” As discussed in earlier posts, the federal government borrows money by issuing bonds.  Though foreigners own many of these bonds, for each dollar of American debt claimed by foreigners, Americans have 89 cents worth of claims on foreigners.  In addition, American investments in foreign assets are more risky than foreign investments in the U.S. – which means that Americans earn more from their assets than foreigners do.

Krugman eventually does concede that debt is a problem without modest increases in taxes – and that raising taxes does have a cost.  He concludes by saying that the government may only continue to maintain a high debt if it also raises taxes.  Since this government is so anti-tax, however, it is unlikely that taxes will be rising anytime soon.

In order to introduce this article into the classroom, you may first want to introduce Krugman with a brief biography to contextualize his claims.  You may then ask the following discussion questions: What economic principles does Krugman introduce in this article (for example, do collecting taxes lead to more or less productivity)?  What are alternative opinions to what Krugman claims? Because Krugman makes many bold statements in his article, what alternative opinions have been discussed in this class in the past? What opinion/idea about the value of having a budget deficit makes more sense to you?


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The State of our Economic Union

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January 25, 2012

On Tuesday night, President Obama addressed Congress in the annual State of the Union speech.  The transcript of his speech may be found here. In just under an hour, Obama called attention to his accomplishments, described his plans for the future, asked Congress to try to overcome partisan difference to get things done, and invoked the American Dream as the ideal to which our country is striving.

During the speech, Obama only mentioned the federal deficit twice.  The first mention was buried within the first ten minutes.  He declared: “American manufacturers are hiring again, creating jobs for the first time since the late 1990s.  Together, we’ve agreed to cut the deficit by more than $2 trillion.  And we’ve put in place new rules to hold Wall Street accountable, so a crisis like this never happens again.”  In this mention, the agreement to cut the deficit seems to be just another of his many accomplishments.  It merely is part of a list, sandwiched between job creation and new regulations for Wall Street.

The second mention is much more informative and complete. He explains:

“When it comes to the deficit, we’ve already agreed to more than $2 trillion in cuts and savings.  But we need to do more, and that means making choices.  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…As I told the Speaker this summer, I’m prepared to make more reforms that reign in long-term costs of Medicare and Medicaid, and strengthen Social Security, so long as those programs remain a guarantee of security for seniors.  But in return, 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.”

According to Obama, the key to lowering the deficit is twofold: the government needs to act more frugally and reform policies that are expensive, and it needs change the tax code so that wealthier citizens pay more.

If your students were not required to watch the State of the Union, you could assign students to read parts of the speech or articles describing the speech.  Due to the fact that the State of the Union may be found on so many different media, you may assign students to pick one medium to watch/read/listen to the speech.

You may begin a discussion on Obama’s speech by asking: how did Obama first bring up the government debt? Why does he mention it within the context in which he does?  When else does Obama address the federal deficit, and what does he propose to address the deficit?  Why did Obama only dedicate two sentences to addressing an agreement made by Congress that took months to decide?  What do you, as students, think about his proposals? What are alternatives to what he proposed?

Because Congress currently has a Republican majority, many critics claim that Obama will not be able to get any of his proposals done during his last year of this term.  Others say that this State of the Union was the Obama’s response to the Republican primary candidates’ criticism.  What do your students think about these two criticisms?

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