Economics Unit 6 Portfolio Assessment All four activities are to be submitted via the Drop Box in Unit 6, Lesson 8 Follow the timeline below. Part 1: Complete Wall Street Journal Classroom Edition: Chapter 14, “Taxes and Government Spending” activity questions #1–3. (Complete during Unit 6, Lesson 2) 6 points Part 2: Complete questions 1–4 of Internet Taxation assessment on pp. 412-413 in Economics: Principles in Action. (Complete during Unit 6, Lesson 2) 8 points Part 3: Complete the Chapter 14 Economic Detective activity. (Complete during Unit 6, Lesson 2) 7 points Part 4: Complete the summary questions below. (Complete during Unit 6, Lesson 8; submit Parts 1–4 via the Drop Box in the lesson.) Based on your Unit 6 studies, answer the following questions. Write in complete sentences that provide specific examples to support your answer. 1. What are some of the challenges the federal and state governments face in trying to implement a fair tax system? Give at least three concrete facts to support your answer. 6 points 2. Which of the tax structures do you think is most fair? Why? (See p. 360–362 of Economics: Principles in Actions for review). Give at least two details to support your answer. 4 points NAME CLASS DATE Economic Detective Problem Centerville is a Midwestern town of about 25,000 people, about 50 miles from a large metropolitan area. Its government consists of a mayor and a town council. In recent years, Centerville has come upon hard times. Its population is dwindling, with many of its young people moving to the city where the job market is good. When a large shopping mall is built about five miles outside of town, local shops and businesses in downtown Centerville cannot compete and start to close. Investigation 1 As businesses close and people move away, property values of commercial buildings and of homes have declined. Many of the buildings in Centerville are being abandoned. 1. How will this situation affect the tax base of Centerville? 2. What effects is the situation likely to have on the operating budget of Centerville? Investigation 2 The Centerville mayor calls a special meeting of the town council to come up with ways to raise more revenue. 2. Which options might they reject for fear of driving more people out of town or forcing more businesses to close? 1. What are some options the town council might explore for increasing revenue? Investigation 3 The mayor and town council decide that the long-term answer to Centerville’s problems is to attract new businesses to the town. To jump-start the process, the town council uses some capital funds remaining from a renovation of police headquarters to buy an abandoned warehouse from a business that has moved to the city. By selling municipal bonds, the council hopes to fund a renovation of the warehouse into a town center and indoor mall with space for town offices and leasing space for several small businesses. 1. (a) If revenue is already a problem, how can the town spend money to buy a warehouse? 12 Chapter 14 Economic Detective (b) How would the proposed indoor mall help attract small businesses? 2. How would new businesses help Centerville’s revenue problem? 3. What are some tax incentives the mayor and town council could use to attract new businesses to Centerville? © Prentice-Hall, Inc. CHAPTER 14 The Future of Centerville NAME - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - CLASS - - - - - - - - - - - - - - DATE - - - - - - - - - - - - - Source Articles from THE WALL STREET JOURNAL. CLASSROOM EDITION Chapter 14 Taxes and Government Spending This article from the January 2004 Wall Street journal Classroom Edition traces the history of the income tax in America. "More Taxes, Please" by Wall Street Journal Staff Reporter Cynthia Crossen illustrates the differing views of tax fairness. Before reading the column below, you may want to look up the following terms: allegations, autocratic, burgeoning, clamored, constituents, contended, deficits, denounced, depriving, entrenched, harbinger, haughty, inequities, perpetuate, plutocrats, requisite, and taint. paper, gloves and lumber. ess than a century ago, the U.S. Congress, Tariffs acted much like a national sales tax: Every responding to pressure from its constituents, consumer, whatever his or her means, paid the same voted to start collecting taxes on people's income. amount on the same goods. Meanwhile, American producers of these items could take advantage of the Many Americans, especially small-business owners, farmers, trade unionists and people who high cost of imports, making a tidy profit while lived in the Midwest, West and South, cheered the undercutting foreign competition. The result was that new tax. Finally, with this new tax, they might get some American industrialists accumulated giant forsome relief from their financial struggles. tunes but paid the same amount of tax as a laborer. To many people who were getting squeezed by low Today, when most political rhetoric focuses not wages and artificially high prices, this didn't seem on whether taxes should be cut, right. Wealth began to take on a but by how much, earlier debates about levying new, uni- "Wh b taint of selfishness. h d versa! taxes seem almost othery, Y 19 13' a SO many "I know that many wealthy worldy. Why, by 1913, had so people clamored for an men are generous and charitable," said Congressman many people clamored for an income tax that the U.S. Consti- income tax that the U.S. Thomas Hudson, a Kansas Democrat, in 1894. "On the tution was amended to allow it? Constitution was amended to other hand, the majority of the How crazy is it to beg to be very wealthy are haughty, overtaxed? allow it? How crazy is it to bearing, autocratic, mean." Abraham Lincoln was William Allen White, a Kansas responsible for America's first beg to be taxed?" editor and columnist, noted income tax during the Civil that when wondering how a War, when he needed cash to man had become rich, people pay his army. Under the 1861 "were ready to believe--and were too often justified in law, a citizen declared his own income and published the belief--that he was a scamp." the figure in the newspaper. The assumption was that The inequities of wealth, tariffs and taxation conno one would publicly lie. When the income-tax law tributed to the rise of a new party, the Populists, who expired in 1872, Americans went back to their old began agitating for a tax on "what you have, not system of paying for their burgeoning government-what you need." T heir adversaries were mostly collecting tariffs on hundreds of imported goods, Republicans, who denounced free trade as economiincluding such necessities as sugar, steel, textiles, L 36 Chapter 14 Source Articles from The Wall Street Journal Classroom Edition NAME ---------------------------------- CLASS - - - - - - - - - - - - - DATE - - - - - - - - - - - - Source Articles from The Wall Street Journal Classroom Edition cally revolutionary, and the income tax as a harbinger of communism. Such a tax, declared Congressman Justin Morrill, a Vermont Republican, in 1864, was nothing more than "seizing the property of men for the crime of having too much." In 1894, a second federal income-tax bill was introduced in Congress, sparking what John F. Witte, author of "The Politics and Development of the Federal Income Tax," called a "magnificent" debate. Under this bill, the first $4,000 l J tJ .s:::: .!2' a: < cS E ~ c: ~ E 0 () C(S :3c: 0 -, 8 ~ @) ~ Q) .I.! c ~ a. c: ~ ~ ~ 0> c: :E .!!l ::0 ::J a. Although Congress eventually passed the income-tax bill, in 1895 it was ruled unconstitutional by a divided Supreme Court. "Today's decision shows that the corporations and plutocrats are as securely entrenched in the Supreme Court as in the low courts, which they take such pains to control," editorialized the St. Louis Post Dispatch. The federal government continued to grow, however, as did its deficits. It was only a matter of time before the idea of an income tax would resurface, of income would be exempt "When the income-tax law from tax, which meant that of especially following the short but costly Spanish-American America's 65 million people, expired in 1872, Americans only 85,000 would owe any war in 1898. In 1909, Demotaxes at all. Most of the taxpay- went back to their old system cratic legislators were joined by a new group of liberal ers would be residents of the of paying for their burgeonindustrial Northeast. Republicans to propose the 16th Amendment to the ConArguing against the bill in the H ouse, Bourke Cochran ing government---collecting stitution. The first $3,000 of from New York contended that a person's income was tariffs on hundreds of exempted, and the top tax because so few people would rate on incomes over pay taxes, the government was imported goods. " depriving most of their patriotic $500,000--was 6%. By 1913, right and privilege to support the requisite 36 states had rattheir government. The only peoified the amendment. Ward McAllister, a wealthy social leader in ple who would end up paying taxes, Mr. Cochran New York, had once said that he would leave the added, were those "who had made the best use of benefits common to all." U.S. if the government ever imposed an income tax on its citizens. In response, William Jennings Bryan But Benton McMillin of Tennessee, responding to allegations that the income tax was a "tax on declared, "Of all the mean men I have ever known, thrift" and a "penalty on success," declared, "As you I have never known one so mean that I would be have been enabled to accumulate this wealth by the willing to say of him that his patriotism was less than 2% deep." blessings of free institutions, contribute something to perpetuate them." cS E c .2 ~::J -o w c: ~ ~ @) QUESTIONS FOR DISCUSSION 1. When and why was the first U.S. income tax introduced? 2. Analyzing Information What was the main drawback of a national sales tax? 3. Drawing Conclusions Do you agree with Benton McMillin of Tennessee that an income tax is a way to give something back to the free institutions that have enabled people to accumulate wealth? Why? Chapter 14 Source Articles from The Wall Street Journal Classroom Edition 37
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