The state of Texas has created a new strand in our TEKS. This strand is called Personal Financial Literacy. It includes TEKS for students from K- 12th. We began the 5th grade portion of Financial Literacy by discussing taxes. It fits in very nicely with our current study of the American Revolution. We have learned about the colonists anger at "taxation without representation," and having taxes placed on sugar, stamps, and tea.
We began by taking notes on sales tax. I began with this tax, because it is applicable to my students. Every student either makes money or has gotten money as a gift and every student has used their money to purchase something. We discussed the fact that the sticker price is not the price you pay at the cash register and this led to our discussion.We discussed the fact that Texas has a sales tax rate of 8.25% and I gave some examples of how this affects the cost of an item. We learned that if you are saving to purchase an item, you need to save more than the purchase price in order to cover the sales tax. I also explained that stores do not keep this money, that it is given to the government and is used to fix roads and bridges, fund public education, and aid local governments.
Next, we moved into payroll tax. I explained that once they were 16, and could hold a job, they would see that the number of hours worked multiplied by their wage did not always equal the paycheck given to them.... We learned that there are three tax deductions taken from checks: income tax (Texas does not have a state income tax), Social Security tax, and Medicare tax. We discussed how these taxes are taken from EVERY paycheck. I explained the roll of Social Security and Medicare and the hope that these services will still be available as they age. The kids were stumped to see that a paycheck could be cut almost in half by taxes and other deductions:
Now it was time go a little more indepth about income tax. I pointed out that income tax is taken from paychecks monthly, but that if the government determines that enough income tax was taken out of your paychecks, you may have to pay an additional amount on April 15. We also discussed some deductions that are available to help keep the owed income tax down or result in a refund. I also showed an example of a 1040EZ to explain that this form is how taxes or refunds were calculated.
Finally, we learned about property tax. I explained that this was yearly, however it could be broken down into monthly payments as part of a mortgage (I did not go into escrow), or it could be paid in a lump sum if the property was paid in full. We discussed that this tax is beneficial to our local government, and to us, in that property taxes help fund schools, emergency services, and our local government.
Tomorrow we will be looking into income:
Gross Income VS Net Income....