In This World, Nothing Is Certain Except Death and Taxes Funding Georgia s Government

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1 Georgia Economic History STATE AND LOCAL GOVERNMENT In This World, Nothing Is Certain Except Death and Taxes Funding Georgia s Government Enduring Understanding State governments extend their power through counties and cities which exist at the discretion of the state. Lesson Essential Question How is government revenue generated in Georgia and how are these funds used? Introduction In this lesson, students will learn how Georgia supports state-funded public programs. Through the activities students will understand various forms of revenue that the state of Georgia collects and what this revenue is used for. GPS Standards SS8E4 The student will identify revenue sources and services provided by state and local governments. a. Trace sources of state revenue such as sales taxes, federal grants, personal income taxes, and property taxes. b. Explain the distribution of state revenue to provide services. c. Evaluate how choices are made given the limited revenues of state and local governments Economic Concepts government revenues, government expenditures, scarcity Knowledge The student will know that revenue forms are varied. individuals, businesses, and corporations provide revenues. there is a process/rationale for collecting revenues. there are repercussions for eliminating/establishing revenues. revenue collection can be voluntary or involuntary. Core Skills The student will be able to identify issues and/or problems and alternative solutions. draw conclusions and make generalizations. determines adequacy and/or relevancy of information. page 1 of 15

2 Georgia Economic History STATE AND LOCAL GOVERNMENT Materials Needed School Programs Worksheet State Revenue Worksheet Georgia Stories video The $10 Billion Question Reading 1: Individual Income Taxes Reading 2: General Sales Tax Reading 3: Property Taxes Reading 4: Federal Grants Budgeting Activity Worksheet Georgia State Revenue Graphic Organizer Worksheet six or seven sets of markers large sheets of paper tape calculators Time Required 3-4 class periods Procedure 1. Prior to class arrange desks in groups of four. Copy the School Programs Worksheet on whiteboard or make into transparency. 2. Begin lesson by asking students what type of expenses are associated with public schools. (Answers will vary but should include teacher pay, books, buses, extracurricular activities, school lunches, etc.) Ask students who pays for all of these things. (Answers will vary) Steer conversation to taxes if students do not mention this source of revenue. Ask students what would happen to their school if the amount of funding coming in suddenly dropped by a large margin. (Something would have to be eliminated) 3. Tell the students that the amount of tax revenue coming in to fund their school has dropped, and some important decisions need to be made for the next school year. Distribute one copy of the School Programs Worksheet to each group. Ask students to rank each program based on importance. 4. Ask each group how they ranked the ten programs. (Rankings will vary) Record this information on the whiteboard or transparency. Discuss student responses. Ask students what would happen if the least popular programs were actually eliminated at their school. (Answers will vary but may include students would not learn as much, school would not be as much fun, students would go hungry, etc.) 5. Explain to students that the process of eliminating programs is something state governments sometimes have to deal with under certain circumstances. page 2 of 15

3 Georgia Economic History STATE AND LOCAL GOVERNMENT Ask students what type of things the state of Georgia provides for citizens. (Answers may include schools, roads, parks) Next, ask students who or what pays for these things. (Taxes, fees, grants) 6. Explain that the state of Georgia, unlike the federal government, must have a balanced budget each year. (Government expenditures cannot exceed government income in a fiscal year) 7. Distribute a copy of State Revenues in Georgia to each student. Explain the directions and ask students to complete reading and guiding questions. Review answers with students. 8. Tell the students they will now be examining specific sources of revenue for the state of Georgia. Give each group one of the following handouts- Reading 1: (Personal) Income Taxes, Reading 2: General Sales Tax, Reading 3: Property Taxes, Reading 4: Federal Grants. (Distribute these evenly. There will be more than one group with the same reading.) Give each group a sheet of the large paper and a set of markers. 9. Tell the students that each group should read their handout and use the information in the reading to draw a picture that represents the revenue source described in the reading. Each group should label the type of revenue source at the top of their drawing. 10. Ask each group to tape their drawing on a wall of the classroom upon completion. (Group one on one wall, group two on another wall, etc.) 11. When all of the groups have hung their drawings, tell the students to move about the classroom and look at each of the drawings. Once everyone has had a chance to see each drawing, ask students to go back to their groups. 12. Distribute one copy of the Georgia State Revenue Graphic Organizer Worksheet to each student. Select one student from each group to explain their drawings. As this is happening, the students at their desks should be filling in their graphic organizers. Be sure to discuss the following questions: How would you describe this form of revenue? From where are these types of revenues collected? 13. Next show students the Georgia Stories video The $10 Billion Question, a short presentation describing the types of services and goods provided by governments using tax revenue. 14. Inform students that they will now have the opportunity to balance the state s budget. Distribute one copy of the Budgeting Activity Worksheet to each group. Read the instructions to the class and answer any questions that page 3 of 15

4 Georgia Economic History STATE AND LOCAL GOVERNMENT the students may have. Students should make budget cuts and answer questions on the Budgeting Activity Worksheet. 15. Ask each group to explain their budget cutting process. What programs were cut? (Answers will vary.) Ask students what the implications will be once the cuts have been made. (Answers will vary but should include the idea that some people are going to see services and programs cut.) 16. Conclude the lesson with a discussion of other possible ways to fix the budget problem. Ask the students what the state of Georgia could do instead of cutting programs. (Answers should include raise taxes or apply/get more federal grants.) Discuss possible drawbacks to these plans. (Voter backlash against higher taxes, not always easy to get federal grants.) The New Georgia Encyclopedia For more background information to support this lesson, read these entries: Capital Budgeting and State Debt Public Authorities and Public Corporations State Budgeting State Revenues in Georgia Revenue Sources, Local EconEdLink Online Lessons For more student activities on economic history in a U.S. context, use these lessons: Assessment no additional activities for this lesson 1. The state of Georgia receives revenue from all of the following except A. fishing license fees. B. parking tickets.* C. cigarette taxes. D. lottery tickets. page 4 of 15

5 Georgia Economic History STATE AND LOCAL GOVERNMENT 2. What form of revenue makes up the largest percentage of money collected by the state of Georgia? A. individual income tax* B. general sales tax C. state lottery D. fees 3. Who is primarily responsible for determining the state s budget? A. governor B. local mayors C. Department of Revenue D. Georgia General Assembly* page 5 of 15

6 Georgia Economic History STATE AND LOCAL GOVERNMENT School Programs Worksheet Directions: Rank each school program in order of importance. Place a one next to the program your group considers to be the most important, a two next to the second most important, etc. Art Athletics Band and chorus Buses and transportation Computers and technology Family and consumer science Foreign-language programs Lunch Media center School nurse page 6 of 15

7 Georgia Economic History STATE AND LOCAL GOVERNMENT State Revenues in Georgia Worksheet Directions: Silently read this brief excerpt about how Georgia collects revenues for public projects and services. Before you read, review the guiding questions below. While reading, highlight or underline supporting details. Every government must have money to operate, and state governments are no exception. If there is to be a public school system with teachers, buildings, and textbooks; if there are to be roads connecting the major cities of the state; if there are to be parks and protected wilderness areas, then state government must have money to pay for those services. The money that a government takes in is called revenue. The state of Georgia has a number of revenue sources, including several forms of taxes, fees, and lottery funds. Between 2000 and 2003, the total amount of state revenue averaged more than $15 billion each year. The creation of the various revenue sources and the terms for collecting revenue are determined by the legislative action of the Georgia General Assembly. The Department of Revenue, a state executive agency, administers and collects most of the state's revenues. The governor, as the state's budget director, is also heavily involved in revenue decisions. The state of Georgia is required by its constitution to maintain a balanced budget, meaning that the government cannot spend more money than is available through revenues and funds saved from previous years. When revenue levels change, so does the budget, as do the programs and services provided by the state government for its citizens. Thus, the success or failure of the state's revenue-raising efforts directly influences the amount and quality of services offered to the people of Georgia. Guiding Questions 1. What services and projects do state revenues fund for Georgia citizens? 2. Who is responsible for deciding what types of revenue should be collected? 3. Which individual acts as the state s budget director? 4. What does it mean to maintain a balanced budget? Source: Adapted from a lesson Created by Brandon Butler and Charles Elfer. page 7 of 15

8 State Revenues in Georgia Worksheet KEY Directions: Silently read this brief excerpt about how Georgia collects revenues for public projects and services. Before you read, review the guiding questions below. While reading, highlight or underline supporting details. Every government must have money to operate, and state governments are no exception. If there is to be a public school system with teachers, buildings, and textbooks; if there are to be roads connecting the major cities of the state; if there are to be parks and protected wilderness areas, then state government must have money to pay for those services. The money that a government takes in is called revenue. The state of Georgia has a number of revenue sources, including several forms of taxes, fees, and lottery funds. Between 2000 and 2003, the total amount of state revenue averaged more than $15 billion each year. The creation of the various revenue sources and the terms for collecting revenue are determined by the legislative action of the Georgia General Assembly. The Department of Revenue, a state executive agency, administers and collects most of the state's revenues. The governor, as the state's budget director, is also heavily involved in revenue decisions. The state of Georgia is required by its constitution to maintain a balanced budget, meaning that the government cannot spend more money than is available through revenues and funds saved from previous years. When revenue levels change, so does the budget, as do the programs and services provided by the state government for its citizens. Thus, the success or failure of the state's revenue-raising efforts directly influences the amount and quality of services offered to the people of Georgia. Guiding Questions 1. What services and projects do state revenues fund for Georgia citizens? Parks, schools, roads, wilderness areas (Answers will vary; student-generated answers appropriate) 2. Who is responsible for deciding what types of revenue should be collected? The Georgia General Assembly 3. Which individual acts as the state s budget director? The governor 4. What does it mean to maintain a balanced budget? Maintaining a balanced budget means that the state cannot spend more money than is available through revenues. Source: Adapted from a lesson created by Brandon Butler and Charles Elfe page 8 of 15

9 Reading 1: Individual (Personal) Income Taxes Directions: You have been provided with information on one of several forms of revenue for the state of Georgia. As a group read the brief passage and draw a picture on the large sheet of paper supplied that shows this form of state revenue. Taxes are the most visible form of government revenue. A tax is a mandatory payment made by individuals, families, or businesses to the government. Taxes are levied on income, property, and most purchased items. Different kinds of taxes are often referred to by the base, or source, of the tax. Income, property, and retail sales are major examples of tax sources or tax bases. Most state-levied taxes are paid as a percentage of the value of the tax base, such as 4 percent of the cost of an item bought at a store or 6 percent of a person's taxable income. Typically, taxes are deposited into a general fund or account, out of which many different government services are funded. The individual (personal) income tax is a graduated tax (i.e., a tax with rates that rise as taxable income increases) on a portion of the income a person or a married couple earns in salaries, wages, or investments. State income-tax rates in 2005 range from 1 percent for a married couple whose taxable income is less than $1,000 annually, to 6 percent for a married couple whose taxable income is greater than $10,000. The individual income tax is Georgia's top revenue source, generating between 40 and 45 percent of the state's total revenue. Source: Adapted from a lesson Created by Brandon Butler and Charles Elfer page 9 of 15

10 Reading 2: General Sales Tax Directions: You have been provided with information on one of several forms of revenue for the state of Georgia. As a group read the brief passage and draw a picture on the large sheet of paper supplied that shows this form of state revenue. Taxes are the most visible form of government revenue. A tax is a mandatory payment made by individuals, families, or businesses to the government. Taxes are levied on income, property, and most purchased items. Different kinds of taxes are often referred to by the base, or source, of the tax. Income, property, and retail sales are major examples of tax sources or tax bases. Most state-levied taxes are paid as a percentage of the value of the tax base, such as 4 percent of the cost of an item bought at a store or 6 percent of a person's taxable income. Typically, taxes are deposited into a general fund or account, out of which many different government services are funded. The general sales tax (or "sales and use tax") is placed on customer purchases of most items bought at retail stores. The sales tax is a percentage of the price of an item. As of 2005, the state has a 4 percent sales tax rate, but because local governments are allowed to add on optional sales taxes, customers may pay up to 7 or 8 percent on retail sales. The state revenue department collects all of the sales-tax revenue and returns the local portion to the appropriate counties, cities, and school systems. Some retail items, especially most food products, have been exempted from the state sales tax. Before exemptions for food items were enacted, the sales tax was the leading tax source in Georgia; now, it is second, usually generating about 30 percent of the state's revenues. Source: Adapted from a lesson created by Brandon Butler and Charles Elfer page 10 of 15

11 Reading 3: Property Taxes Directions: You have been provided with information on one of several forms of revenue for the state of Georgia. As a group read the brief passage and draw a picture on the large sheet of paper supplied that shows this form of state revenue. Taxes are the most visible form of government revenue. A tax is a mandatory payment made by individuals, families, or businesses to the government. Taxes are levied on income, property, and most purchased items. Different kinds of taxes are often referred to by the base, or source, of the tax. Income, property, and retail sales are major examples of tax sources or tax bases. Most state-levied taxes are paid as a percentage of the value of the tax base, such as 4 percent of the cost of an item bought at a store or 6 percent of a person's taxable income. Typically, taxes are deposited into a general fund or account, out of which many different government services are funded. The property tax, while one of the major sources of revenue for local governments, generates only a small portion (less than 1 percent) of the state government's funds. Property tax is a tax that is imposed on persons because of their ownership or possession of property and is measured by the market value of the property. All real property and all personal property are taxable unless the property has been exempted by law. Real property is land and generally anything that is erected, growing, or affixed to the land; personal property is everything that can be owned that is not real estate. County and city governments administer and collect property taxes, and in doing so, they add on a small state property tax which is forwarded to the state. The state revenue department provides some supervision of local government property tax administration to ensure a degree of uniformity from county to county. Source: Adapted from a lesson created by Brandon Butler and Charles Elfer page 11 of 15

12 Reading 4: Federal Grants Directions: You have been provided with information on one of several forms of revenue for the state of Georgia. As a group read the brief passage and draw a picture on the large sheet of paper supplied that shows this form of state revenue. A federal grant is an award of financial assistance from a federal agency to a recipient to carry out a public purpose of support or stimulation authorized by a law of the United States. Federal grants are not federal assistance or loans to individuals. There are many groups of organizations that are eligible to apply for government grants. Typically, most grantee organizations fall into the following categories. Government Organizations State Governments Local Governments City or Township Governments Special District Governments Native American Tribal Governments (federally recognized) Native American Tribal Governments (other than federally recognized) Education Organizations Independent School Districts Public and State Controlled Institutions of Higher Education Private Institutions of Higher Education Public Housing Organizations Non-Profit Organizations For-Profit Organizations Small Businesses page 12 of 15

13 Georgia State Revenue Graphic Organizer Worksheet Individual (Personal) Income Taxes Sales Taxes Property Taxes Federal Grants How would you describe this form of revenue? From where are these types of revenue collected? page 13 of 15

14 Georgia State Revenue Graphic Organizer Worksheet KEY Individual (Personal) Income Taxes Sales Taxes Property Taxes Federal Grants How would you describe this form of revenue? An income tax is a tax levied on the financial income of persons, corporations, or other legal entities Sales tax is a consumption tax charged at the point of purchase for certain goods and services. Property tax is a tax that is imposed on persons because of their ownership or possession of property and is measured by the market value of the property. Federal grant means an award of financial assistance in the form of money, or property in lieu of money, by the Federal Government From where are these types of revenue collected? Taxes on salaries, wages, and investments by people; taxes on business income within Georgia. Taxes on point of sales purchases. Taxes on property Federal government agencies page 14 of 15

15 Budgeting Activity Worksheet Each of you has been selected to help the Governor create this year s budget. Unfortunately, the revenues collected by the state are less than they were last year. Your job is to determine how much money to provide each program listed. Keep in mind that you can cut funding for some programs while keeping the budget the same for others. Shown below is a list of programs and the previous budget for these programs. Use the This Years Budget column to make changes which will result in a balanced budget for this year. This Year s Total Revenue: 24,219 Billion Program Last Years Budget This Years Budget Community Health (e.g., low 11.4 Billion income Medicaid/nursing homes) Education (e.g., schools, teachers, special education) Georgia Student Finance Commission (e.g., Hope Scholarships, Pre-K) Human Resources (e.g., welfare, food stamps, elderly support) Natural Resources (e.g., environmental conservation, historic preservation, state parks) Public Safety (e.g., highway safety, fire fighter training) Transportation (e.g., highway construction, bridge repair) Veterans Affairs (e.g., cemeteries, retirement pensions) 8.9 Billion 500 million 3.5 Billion 165 Million 117 Million 2 Billion 37 Million Total 26,619 Billion 24,219 Billion 1. How much money must be cut in order to balance this budget? 2. Which category did you cut by the largest amount? Why did you cut the most from this category? 3. What are some of the problems the state of Georgia may encounter because of your cuts? Adapted from Governor s Budget Report: Amended Fiscal Year 2008: page 15 of 15