Dec 05, 2017

Activity: Let's Make A Tax Plan Prediction

How to make taxes exciting...hmm. That's a challenge! How about getting students to make predictions on the competing tax plans put forth by the House and Senate and predict where the final tax legislation will land? 

First a little background. On late Saturday morning, the Senate passed a tax plan that now needs to be reconciled with the House plan that was passed a few weeks back. While many are confident that ultimately a bill will get to the President's desk to be signed before year-end, I thought the differences between the House and Senate plans might make for an interesting mini-activity for your class. The goal is to get students familiar with various elements of the tax code, noodle over the arguments made for/against the specific elements, think critically as they read various sources and finally make a prediction about where things will end up. 

This WaPo article highlights seven of the major differences between the plans: 

  1. Individual mandate
  2. Tax cuts for individuals
  3. Estate tax
  4. Child tax credit
  5. Mortgage interest deduction
  6. Tax brackets
  7. Timing of corporate tax cuts

How about breaking the class into teams and have each group do online research on just ONE of the items on this list. Their research should focus on answering these questions:

  • In your own words, explain the tax item that you are responsible for (e.g., the estate tax places a tax on the assets of a dead person that are being transferred to their heirs)?
  • What are the arguments/justifications being made to support a given position (e.g., Why increase the child tax credit?)? Find arguments from at least three sources (pro and con). 
  • What is the cost differential between the two plans (e.g. House plan repealing the estate tax will cost $151 billion, the Senate plan limits estate tax and would cost $83 billion)
  • Which of the two plans do you find you are more in agreement with? Why?
  • Where do you think the final tax plan will land after the two bills are reconciled in committee? Why?

As each group gives you the answer to the final question, you should tally up the costs of all of their choices to see if you get close to a bill that will pass. To assist you, here are the various items and their net impact on the tax bill. Circle the student responses and then revisit when the final bill is agreed upon. 

House Bill  Impact Senate Bill  Impact
Preserve ACA Mandate No impact Repeal ACA Mandate  +$338 billion savings
Corp. and individual taxes permanent N/A Individual tax cuts expire 2025 N/A
Repeal Estate Tax  -$151 billion cost Partial repeal of Estate Tax -$83 billion cost
Child Tax Credit increase to $1,600 -$430 billion cost Child Tax Credit increase to $2,000 -$580 billion cost
Deduct mortgage interest up to $500,000 principal N/A No change to current mortgage interest deduction  N/A
Tax brackets: 7 to 4 -$1.09 trillion cost Tax brackets still 7 but reduce top rate to 38.5% -1.17 trillion cost
Corporate tax rate to 20% in 2018 No additional savings Corporate tax rate to 20% starting in 2019 +$127 billion in savings due to delay



About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

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