I was entertained by this Planet Money podcast on my walk into work this morning. It takes two items from our Form 1040 federal income tax form and dives into the details about how they ended up on the form. It tells a larger story about how the tax code is written in this country (something about not wanting to see how the sausage is made).

• The first is a box where taxpayers check “Yes” or “No” to the following question: “Do you want $3 of your federal tax to go to the Presidential Election Campaign Fund?”
• The second item is line 24 of the form 1040 which reads “Certain Business Expenses of Reservists, Performing Artists and Fee-Basis Government Officials”

Questions for students:

• How was the Presidential Election Campaign Fund developed? What was the motivation behind it? Is it working as intended?
• How did “performing artists” get included in line 24 so that they could deduct their business expenses?  Is this still a worthwhile deduction for them? Why or why not?
• What do these two examples tell you about how the tax code is created in the U.S.?
• What is another way to think about an allowable tax deduction in our tax code?
• Why do you think deductions are an easier way to favor specific groups as compared to providing direct payments?

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.