Income Inequality Demonstration
Have one hundred cookies (Oreos are a relatively cheap way of doing this) displayed at the front of the classroom. Break students into five groups. Ask groups to develop a plan for how the cookies should be distributed among the class. Then, tell students that their groups represent each quintile of the population. Randomly assign each group to be the first, second, third, fourth, and fifth quintiles. Then, divide the cookies among the groups according to how income is distributed between the various quintiles. The lowest quintile should split just three cookies. The second quintile should split 8 cookies. The third quintile should split 14 cookies. The fourth quintile should split 23 cookies. Meanwhile, the top quintile should split 52 cookies. Ask the students if this distribution matches what they came up with earlier. What concerns does this type of distribution create for how society operates?
“Wealth Inequality in America” (6:24)
Show the video “Wealth Inequality in America,” which can be found for free on Youtube. The video uses infographics to further explain and illustrate how wealth is unequally distributed in America. After the video, ask students to discuss any facts from the video that they found interesting or even disturbing. What are the implications of such inequality? Ask students if this type of inequality is troublesome for our country. If so, why?
Game Theory of Trade Wars
Have students do research about the trade war between the United States and China. Then, have students develop a payoff matrix that outlines the effects of each country choosing to impose a tariff or not choosing to impose a tariff. Have a classroom discussion about whether playing this game with multiple iterations will have an impact on how each country makes decisions in earlier rounds of the game.
Progressive Taxation Exploration
Overview
Students will explore the nature of the progressive tax system by completing an exploration on Google Sheets. Students will learn the difference between the marginal tax rate and the average tax rate. Students will understand how the progressive tax system allows for the redistribution of income. The Initial Understanding section is meant to gauge students’ assumptions about the concepts before any learning happens. Students will then test their assumptions in the Exploration section. Finally, students will revisit the same questions from the Initial Understanding section and summarize their findings in the Conclusions section. Students should examine the differences between their initial assumptions and their final conclusions.
Initial Understanding
The US tax system utilizes a progressive tax bracket system, meaning that successive tax brackets have larger marginal tax rates. The current tax brackets and marginal tax rates can be seen below.
Tax Bracket
|
Income –
Lower Limit
|
Income –
Upper Limit
|
Marginal Tax Rate
|
1
|
$0
|
$9,525
|
10%
|
2
|
$9,526
|
$38,700
|
12%
|
3
|
$38,701
|
$82,500
|
22%
|
4
|
$82,501
|
$157,500
|
24%
|
5
|
$157,501
|
$200,000
|
32%
|
6
|
$200,001
|
$500,000
|
35%
|
7
|
$500,001
|
N/A
|
37%
|
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What percentage of your income is taxed if you earn $200,000?
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Who pays less in taxes, someone who earns $38,700 or $38,701? Explain.
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People often claim that progressive taxes are unfair and disincentivize working additional hours to earn more money. How accurate is this statement? Justify your reasoning.
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A progressive tax system helps to redistribute income in a country. Explain how.
Exploration
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Open the Google Sheets file “Marginal vs. Average Tax Rate,” which can be found at <https://docs.google.com/spreadsheets/d/1KfTl_jEc765HImdQA6uSgFBXp3ygD_o9QqJul_1NK6s/edit?usp=sharing >. Make a copy, which will allow you to edit the file.
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Who pays less in taxes, someone who earns $38,700 or $38,701? Enter each value into the income cell B1. How much disposable income does someone who earns $38,700 have compared to someone who earns $38,701?
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Complete the table below by entering the given incomes into the spreadsheet in cell B1.
Tax Bracket
|
Income
|
Total Taxes Paid
|
Average Tax Rate
|
1
|
$5,000
|
|
|
2
|
$25,000
|
|
|
3
|
$50,000
|
|
|
4
|
$100,000
|
|
|
5
|
$200,000
|
|
|
6
|
$400,000
|
|
|
7
|
$1,000,000
|
|
|
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Select cell D12, the Average Tax Rate value, to see the formula. How is the average tax rate calculated? Do not just copy the formula. What values are being used?
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Does someone in the 3
rd
tax bracket actually pay 22% of their income in taxes? Examine the results you found in the Google Sheets document to help you explain the difference between the marginal tax rate and the average tax rate.
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Many Americans complain that the progressive tax system encourage people to work less so they remain in a lower tax bracket. Does the progressive tax rate system actually disincentivize working more? Explain.
Conclusions
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What percentage of your income is taxed if you earn $200,000?
-
Who pays less in taxes, someone who earns $38,700 or $38,701? Explain.
-
People often claim that progressive taxes are unfair and disincentivize working additional hours to earn more money. How accurate is this statement? Justify your reasoning.
-
A progressive tax system helps to redistribute income in a country. Explain how.
Planet Money Podcasts and Reflection Questions
The following Planet Money podcasts directly address the primary topics that will be addressed throughout the year as possible solutions to income inequality. Depending on time constraints for the teacher, these podcasts can either be played in class or assigned to students to listen to outside of class.
Episode #
|
Podcast Title
|
Length
|
Where to Include
|
217
|
The Art of Living at the Poverty Line
|
22:28
|
Unit 1f: Introduction to Income Inequality
|
356
|
The Surprisingly Entertaining History of the Income Tax
|
18:15
|
Unit 1f: Introduction to income inequality: the Gini coefficient, Lorenz Curve, and progressive taxation
|
411
|
Why Preschool Can Save the World
|
20:56
|
Unit 1g: Production possibilities through the Lens of Income Inequality
|
412
|
How to Fix the Patent Mess
|
17:15
|
Unit 3f: Comparing the four market structures through the lens of income inequality
|
551
|
The Case Against Patents
|
16:04
|
Unit 3f: Comparing the four market structures through the lens of income inequality
|
510
|
The Birth of the Minimum Wage
|
16:55
|
Unit 4d: Comparing factor market structures through the lens of income inequality
|
796
|
The Basic Income Experiment
|
26:58
|
Unit 4d: Comparing factor market structures through the lens of income inequality
|
698
|
The Long Way Home
|
16:13
|
Unit 5e: Subsidies
|
833
|
Worse. Tariffs. Ever.
|
21:06
|
Unit 5f: Free Trade vs. Tariffs
|
849
|
It Takes Two to Make a Trade War Fight
|
22:51
|
Unit 5f: Free Trade vs. Tariffs
|
Ask students to reflect on some of these reflection questions as they listen to various podcasts. These reflection questions have been kept broad intentionally to encourage students to think about income inequality from each of these different lenses. Keep in mind that these reflection questions are not designed to get students to reflect on the individual podcast, but rather how students can utilize the podcast’s content to discuss income inequality.
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How can we address income inequality from the lens of the podcast topic?
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In terms of income inequality, what are the pros and cons of the topic?
Blog Post and Debate Overview
Blog Posts and debates can occur about once each marking period, covering a range of topics throughout the year, including trade and tariffs, externalities and corrective taxes/subsidies, factor markets and wage floors, and monopolies and patents. This activity starts with an online blog post that prompts students to research a given topic. Students do not know which side they will have to argue until the day of the debate, so it is important that they research all sides of the debate. Students will write two responses to the blog post. The initial response is 500 words where the student takes a specific position and argues in favor of that position. Students are required to cite their research and be clear and concise with their arguments. The second post is in response to someone else’s initial post and should either refute the initial post, pose questions that might poke holes in the post, or provide additional support for that post. This response must be a minimum of 200 words. The blog post will serve as a resource tool for students on the day of the debate. Initial blog posts are due two classes before the debate. Responses are due the class before the debate.
On the day of the debate, randomly split the class into two-three teams and assign each team one of the two-three arguments. Teams should then divide their members into the following roles: debater (4 people), supporter (3 people), or judge (2 people). The roles were devised for a class of 27. If a debate topic has fewer arguments, modify the roles appropriately. Feel free to modify how many people serve in each role based on your class size.
Debate Roles
Debater – 4 people per team
Debaters should be well-versed in the debate topic as they are the only team members that can talk during the debate. They are responsible for presenting the team’s primary arguments along with supporting evidence in the form of facts, economic concepts, graphs, and other infographics. Debaters also rebut each of the other team’s arguments.
Supporter – 3 people per team
Supporters compile and organize the research the team has done. During the debate, supporters are the only team members that can access the internet to do further research. Supporters are responsible for passing information to the debaters and ensuring the debaters have enough content to fill the time allotted for speaking.
Judge – 2 people per team
Judges are responsible for scoring how well the other teams argued and rebutted along with how well the debaters and supporters collaborated to fill their time. Judges record all arguments and evidence that has been presented. Judges monitor whether evidence is relevant to the team’s primary argument. Finally, judges determine, based off the notes they took, which of the other two teams performed better.
Elements of the Debate
Position Statements, 1 minute
Position statements should clearly define a team’s position and should outline the three arguments the team will use to justify their claim.
Planning Period, 2 minutes
Groups should be given a period to work as a team in between each phase of the debate; that is, between the position statements, each argument-rebuttal-response cycle, and the conclusion.
Arguments, 4 minutes
Each argument should present one key idea and should include economic data, microeconomic graphs that have been studied in class, infographics, citations, and any other relevant information that the team may want to present.
Rebuttals, 2 minutes
Each rebuttal should be in the form of a question. The opposing teams should listen to the presenting team’s argument and try to ask questions that could poke holes in the team’s argument. Rebutting teams should not present their own facts, just find flaws in the presenting team’s facts. This takes place directly after each argument without a planning period.
Responses, 2 minutes
Each response to a rebuttal should attempt to clarify and answer the questions posed by the opposing teams. This takes place directly after the rebuttal without a planning period.
Conclusions, 1 minute
Conclusions should remind the audience of the team’s claim, three arguments, and provide any closing remarks as to why their claim is correct.
Debate Format
The general layout of the debate is outlined below. Teams should alternate to present each phase of the debate; that is; each team should present each phase before moving on to the next phase of the debate. The debate will take approximately 86 minutes to complete under these conditions.
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Position Statements
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Planning Period
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Cycle 1: Argument-Rebuttal-Response
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Planning Period
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Cycle 2: Argument-Rebuttal-Response
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Planning Period
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Cycle 3: Argument-Rebuttal-Response
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Planning Period
-
Conclusions
Debate Prompts
Debate #
|
Prompt
|
Where to Include
|
1
|
Should the government grant pharmaceutical companies patents, subsidize R&D, or neither? Justify your argument.
|
Unit 3f: Comparing the four market structures through the lens of income inequality
|
2
|
Should the US have a minimum wage, a guaranteed basic income, or neither? Justify your argument.
|
Unit 4d: Comparing factor market structures through the lens of income inequality
|
3
|
Should the US tax sugary foods, subsidize healthy foods, or neither? Justify your argument.
|
Unit 5d: Taxes
|
4
|
Should the US engage in free trade, implement tariffs, or remain isolationists? Justify your argument.
|
Unit 5f: Free Trade vs. Tariffs
|