ᕕ( ᐛ )ᕗ Herman's blog

Teaching tax in school

On becoming an adult, one thing has stuck out to me as a huge oversight in the high school system is that we never learnt about tax1.

I'm constantly shocked by the lack of tax literacy in the broader population. I'm not even talking about the logistics of filing tax returns, but on what taxes are, the different types of tax, and how they work.

I also regularly hear wide-spread simple misconceptions about tax, which illustrate a gross misunderstanding of the system. I recently heard someone say that they didn't want to get a raise since that would put them into a higher tax bracket, and they would therefore earn less take-home pay. That's...not how that works.

This is an oversight by the government, who sets the (public school) curriculum. We're taught many things in school that have marginal use later in life. I personally love poetry and finding subtle meaning in words, but it's not for everyone. It's not a prerequisite to operate in society. Whereas, everybody is required, by law, to pay taxes.

By not providing education around tax-literacy many people break the law without even knowing it. They are also much less likely to pay tax due to the daunting, complicated nature of a system they are unfamiliar with.

Misunderstanding tax also leads to mistrust in government. And a healthy amount of mistrust is necessary in a functioning democracy, but when the system is too opaque, problems become harder to address. Most people have a vague notion that tax is used to pay for things like roads and other infrastructure. However, I think if people fully understood the purpose of taxation and the way that money is regulated and spent, they would be slightly less bitter about it. Maybe.

I propose making financial literacy a mandatory subject for high school students, with a focus on understanding tax (and a few other things like real-world credit and debt). Teach them how to calculate income tax and capital gains. Show them how to be tax efficient without breaking the law, and about different tax jurisdictions. Hell, teach them how to register a company and the basic structure of a small organisation.

If we want a future where young people innovate and contribute to the overall well-being of a country, we need to get this right. Knowledge of taxation leads to compliance. And a well funded government (all other things being equal) is better than an underfunded one.

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  1. I'm a South African tax resident, but this applies to many, if not most other countries. Especially the US, which has an even more convoluted tax system.