Do You Understand Taxation Better than a 5th Grader

Understanding taxation is the foundation to strong government policies and the citizens and taxpayers who advocate for them — i.e. you. Understanding how the government collects money helps you:

• understand your property tax bill (or know that you’re paying taxes through rent),
• make smarter choices because you understand how the government encourages or discourages certain types of spending – at certain times – through taxation, and
• helps you evaluate candidates for office based on how their beliefs on what is needed to thrive align with yours.

To help you, along with school-age children, the Tax Foundation created TaxEDU. This nonprofit charity’s goal is to develop stronger tax codes that are simple, neutral, transparent, and stable.

TaxEDU creates tools that help orient you on all things taxes, including the vocabulary. Examples include:

• Tax Policy 101: classroom resources to raise tax literacy
  • Three types of taxes (on what you earn, buy, own) and how they are paid and collected
    • Earn = Income:
      • taxation on what you earn through working, owning a business,  or investments
      • individual income tax, corporate income tax, payroll taxes, and capital gains (personal item that gains in value when sold)
    • Buy:
      • taxation on what you purchase or through what gains in value
      • sales tax, company’s gross receipt taxes (taxation on sales regardless of expenses), value-added taxes (taxation on each phase of production of a good or service), excise taxes (imposed on specific goods like cigarettes, gas, alcohol, etc.)
    • Own
      • taxes on what you own or inherit
      • property taxes, tangible personal property taxes (taxes assets businesses use such as machinery and equipment), estate and inheritance taxes, and wealth taxes
• Tax Basics: understand debates and principles around sound tax policy
• Legislative Courses: crash courses for tomorrow’s leaders
• Deduction Podcast: how to stay current on what’s happening