April 15 is approaching — the deadline to file taxes.
For many people, filing taxes is time-consuming and complicated.
For those who hire a professional to complete their taxes or purchase a program, there are additional expenses associated.
Much of the time and effort can seem futile, so looking for something positive can help you maintain your sanity while you spend a lot of time and/or money figuring out how much to pay the government.
One good thing you can do is use this moment to teach kids. Here are a few ways:
First, you could discuss the different government branches that collect income taxes.
Where I live in central Pennsylvania, we pay federal taxes (percentage paid varies by income), state taxes (3% of income) and local taxes (2% of income). We must submit returns for all three of these.
There are also payroll taxes, which fund Social Security and Medicare (over 8% on income, but then your employer has to pay as well, which decreases your wages).
Second, and relatedly, you could discuss how much of your income (both amount and percentage) you are paying in taxes.
If you live in Pennsylvania, you automatically pay over 13%, even if your income is low enough to pay no federal income taxes, given your contributions to state, local, and SS/Medicare.
If you pay federal taxes, it will be more — often much more.
Explaining to children that this is happening is important.
You should share that this amount is just the beginning of what you’re paying, of course, as there are also sales taxes, real estate taxes, taxes on licenses and more.
Third, you could discuss what the money you’re paying in gets you. This isn’t always easy to track, but starting the conversation is valuable.
For federal taxes, most fund national defense and entitlement programs, but there are hundreds of billions spent in other ways.
For state and local taxes, funding provides roads, schools, police forces and more.
There are more advanced issues you could discuss as well, such as equity in taxation.
For example, almost all people believe those who make more money should pay more in taxes.
A key question of debate is how much more should high-earners pay?
Some advocate that everybody pays the same percentage – like with Pennsylvania’s tax system. Some advocate that the richer somebody is, not only should they pay more in taxes, but the percentage of income they pay in taxes should be higher.
That is the way federal income taxes are set up. Others advocate for taxes on not just income, but wealth (which seems disastrous, but that’s another article).
If you receive a refund, ensuring your kids understand that this means you overpaid the government throughout the year is also useful.
Taxes are complicated and take up a large portion of workers’ incomes but also provide services. The earlier you use this opportunity annually to discuss these issues with kids, the better.
Matthew Rousu is dean and professor of economics in the Sigmund Weis School of Business at Susquehanna University.