Chapter 22

Government and Taxation

Exercise 1
Discussion. Read the following questions. Which do you agree with? Be sure you are able to
justify your position and be careful that you don’t flip flop (to change your answer in order to
justify your position).
1. Is government the solution to the problem or is government the source of the problem?
2. Are there too many regulations in business?
Examples of Government intrusion into everyday life.
How much freedom do you really want and which of the following laws do you agree with?
3. Should you get a penalty for not having your seat-belt on in your car?
4. The most dangerous thing to drive is a motorcycle since they are far more dangerous
than a car. Motorcycles are jokingly called “donor-cycles” by doctors. Should
motorcycles be outlawed?
5. Is your answer for question 3 the same as question 4 in respect to Freedom?
6. Should drugs that don’t need a doctor’s prescription be allowed to be sold everywhere
or only in a pharmacy?
7. What should happen to people who sell drugs to children?
8. What should happen to bars and pubs that sell alcohol to children?
9. Is your answer for question 7 different from question 8?
10. University education should be free to students. Yes or no?
11. If you get a free university education from the government, you should work in the
country or be forced to pay back the tuition if you decide to leave to another country.
12. Smoking should be illegal in bars, restaurants, and clubs. Yes or no? Do non-smoking
pubs exist in your town?
13. Prostitution should be illegal. Yes or no?
14. Which would you rather have: 4-5 weeks holiday and live in a flat or 10 days holiday
and have a nice house and car?
15. Can government stop global warming?
16. Should we protect a struggling company from foreign competition or let them go out
of business if they can’t compete.
 Exercise 2
Match each word or phrase to its meaning
1. to itemize a. form for filing taxes
2. to refund b. to collect taxes from the source
3. deductions c. level of taxes you pay
4. penalty d. relative you can claim that you support
5. to calculate e. to go over
6. tax bracket f. single / married / filing together or separately
7. gross income g. freedom from obligation
8. liable h. total income before taxes are taken
9. tax return i. get money back
10. to withhold j. to list separately
11. to review k. violations
12. dependent m. subtractions
13. filing status n. to figure out by using math
14. interest income o. legally responsible
15. exemptions p. money in the bank

Exercise 3
Use words from the above exercise to fill in the blanks
1. Every child you had up to a certain age can be claimed as a _______________ which
reduces the amount of income tax you pay.
2. After you _______________________ your taxes, it is important to double-check it to
make sure it is accurate.
3. Your wages, interest from your savings account, plus any other income makes up your
__________ ____________.
4. If you are single your tax _______________________is one, but if you are married
with one child, it will be 3.
5. The higher your salary, the higher your ________ ____________, and the more you
will pay in taxes.
6. After you complete your _________ _____________ you must take it to the tax office
before March 31.
 7. Will you ________________ my calculations to make sure it is correct?
8. If you have a lot of different things that you can claim as deductions for your taxes, it
is better to ___________________________
9. If you pay more taxes than is needed throughout the year, you can get a tax
__________ equal to the amount you overpaid.
10. If you have a lot of money in the bank you may have to pay taxes on the ___________
________________.
11. You are ____________ from paying taxes if you don’t earn the minimum amount of
income per year.
12. You can _____________________ certain things from you taxes like charitable
contributions and certain expenses for starting a new business.
13. If you don’t file your taxes by March 31 you will have to pay a
______________________
14. If you earn over a certain amount you are ______________________ to pay taxes.
15. To keep a part of you paycheck every month so that you have the money to pay the
taxes during tax season is called tax ___________________.

Exercise 4
The Taxman
Did you know that England was once the sick country of Europe with the lowest growth and
the highest unemployment? It was also a very socialist oriented government with extremely
high taxes. This system was referred to in the Beatle’s song the Taxman.

Read the text for the Beatles Song “The Taxman” and listen to it on You Tube.

Let me tell you how it will be Commentary:

There's one for you, nineteen for me
'Cause I'm the taxman,
yeah, I'm the taxman
Should five per cent appear too small
Be thankful I don't take it all'
Cause I'm the taxman,
yeah I'm the taxman
If you drive a car, I'll tax the street,
If you try to sit, I'll tax your seat.
If you get too cold I'll tax the heat
If you take a walk, I'll tax your feet.
Don't ask me what I want it for
If you don't want to pay some more'
Would you want to pay a tax rate of
95%? In the first stanza of the song
There's one for you, nineteen for me
was actually true. In the 1960’s England
had a top tax rate of 95% for wealthy
people. Of course few people would
pay this as there were plenty of
loopholes. A loophole is an exception
in the law. And many famous British
Rock stars moved out of the country or
hid their wealth in other countries.
By the 1970, times where so bad and
the future for young people so grim, it
gave birth to a new music movement
Cause I'm the taxman, yeah, I'm the taxman that was a protest against the system.
Groups like the Clash and the Sex
Now my advice for those who die pistols wrote songs about little hope for
Declare the pennies on your eyes' the future.
Cause I'm the taxman, yeah, I'm the taxman
And you're working for no one but me. Then came the Reagan/Thatcher
Revolution.

The Reagan/Thatcher Revolution- In the 1970’s, government controlled many aspects of

the economy including business. If a big business was in trouble, the government would take
over the business in order to keep people from losing their jobs. Unfortunately, this made that
very business uncompetitive. Another thing government did was control many parts of the
economy. For example Airplane travel was regulated and airlines were guaranteed a profit.
The cheapest Airline ticket from Los Angeles to New York was $1,442 in 1974. Today, the
cheapest ticket for the same route is $284. The result was stagflation; a period of high
inflation and high unemployment.

Reagan/Thatcher removed many regulations from business and allowing new companies a
chance to go into business and competing against the big established companies.

Unions could also dictate higher prices and great working conditions (and virtually
guaranteeing you wouldn’t be fired). Unions were no longer allowed to go on strikes that
would hurt the country. When the coal-miners of England went on strike, Thatcher sent in the
army to dig coal to keep the economy going. When the air traffic controllers went on strike in
America, Reagan fired all of them and replaced them. Today, Unionized employment is 6.9%
in the private sector in the US and 15.1% in the UK.
Discussion:
1. What percentage of a person’s total income should be paid to taxes?
2. What kind of services from the government do you expect?
3. What do you think the government shouldn’t be doing in regards to spending?
 Exercise 5
Keynesianism vs. Neoclassic theory
In no other field of science can two people win the Nobel Peace prize for saying the opposite
thing. In Economics, there has been an on-going battle about what the role of the government
should be. This can best be sum up as a battle between the top two economists; John
Maynard Keynes and Milton Friedman. The following text briefly describes the two different
points of view

John Maynard Keynes Milton Friedman

John Maynard Keynes was a British An economist that founded the Chicago school
economist who lived from 1883 to 1946. He of economics, Milton Friedman was mainly
is most well-known for his simple opposed to too much government interference
explanation for the cause of the Great in the market.
Depression.
After World War II, many countries adopted
His theory is that people spend some money Keynesian philosophy of government
and save some money. If people are afraid, spending, but during good times the
they will save more money. Because they government kept spending creating inflation.
are not buying things, businesses will fire Government also started to create many
their employees and business will not open regulations that made it harder for small and
new stores or make new things. The new companies.
economy goes down.
Milton Friedman stated that in bad times, the
Keynes’ solution was for the government to central banks should lower interest rates and
spend money when people are afraid to make it easier to get access to money, but
spend money. The government can do this government should not try to create jobs. Too
by printing more money and borrowing many government jobs become competition for
money. non-government jobs and people become
addicted to government spending.
In other words, during bad times, the
government should borrow and spend Less government involvement in the Economy
money. During good times, the government was also a part of the Austrian School of
should pay back the money (this has rarely Economics.
happened.
Exercise: Which of the following concepts fit into either to either the ideas of Keynes or the
ideas of Friedman?
Keynes Friedman

1. If people are not buying, businesses aren’t selling. Then

businesses fire people who then buy less…… a downward spiral.
2. Government is not the solution to the problem….. government
is the problem. ….. Ronald Reagan
3. If we expect the economy to be worse tomorrow, we are less
likely to open up new stores or hire new employees
4. Liberals (pro-socialist people) always run out of other people’s
money to spend…..Margaret Thatcher.
5. If you lower taxes, people will have more money to spend and
this will put people to work.
6. If you lower somebodies pay from 5€ an hour to 4€ an hour, he
will try not to spend so much. But if you raise the price of milk
for 0.40€ a liter to 0.50€ a liter, he will continue to spend.
7. Moderately high inflation means lower unemployment (the
principle behind the Phillips curve)
8. In the end, inflation will cause high unemployment as banks
will not want to lend to business and people.
9. In the end, we are all dead
10. Governments do not create a growing economy….. business
and business innovations create a growing economy.
11. Governments have always helped to stimulate the economy
and innovation. Governments paid for Railroads, highways,
bridges, and paid for space exploration which was all good for
businesses.
12. If one person saves money, he is being good and wise. If a
whole country saves money, then everyone will be worse off since
no one will have a job.
13. We are better off today with many different telephone
companies than one that was controlled by the government. We
would be better off if other things like the post office, education,
and medicine were not controlled solely by the government.
 Exercise 6
What should the government be spending taxes on?

Look at the following table. If you could decide on how much to spend for each area, what
would you increase, decrease, or keep the same?
increase decrease keep
the
same
1. Spending on defense
2. Pensions for old people (starting at age 65)
3. Money for short term unemployed (less than 2 years)
4. Money for long-term unemployed (more than 2 years)
5. Money for salaries for Politician
6. Money for new highways
7. Money for education (primary education)
8. Money for education (University education)
9. Money for having children (less than two children)
10. Money for having children (more than 3 children)
11. Money to help Romany people
12. Spending on health care
13. Money spent on the railroads
14. Your ideas:

15. Your ideas:

 Exercise 7
Vocabulary
Everyone is for lower taxes so that we have more money for ourselves, but we also want the
government to take care of us. A lot of people think we should have a ___1___ tax where the
rich pay a higher rate than the rest of us. But in many countries the rich always finds a way of
paying less.

The truth is that we want big government. We don’t what our farmers to go out of business so
we give them a ___2___ that guarantees them a higher price than what they normally would
get. As a student you get a discount ___3___ on busses and trains and in Slovakia University
___4___ is free until your 25. After that you must pay a ___5___ to go to school. We are
___6___ by the poor conditions of our hospitals but are glad that medical care is free. We are
glad that we are able to catch a train, but the price of a ticket doesn’t come close to ___7___
the cost of operation. We want maternity ___8___ for our wives, unemployment ___9___
when we lose a job, and a guaranteed ___10___ for when we retire.

We want all of this and low taxes too.

Choose the correct answer to fill in the blank.

1 a) flat b) regressive c) progressive d) bracket
2 a) loan b) subsidy c) payment d) check
3 a) fare b) ticket c) bill d) pass
4 a) fare b) payment c) tuition d) bill
5 a) price b) fee c) cost d) bribe
6 a) scared b) agitated c) appalled d) disgusted
7 a) covering b) paying c) billing d) maintaining
8 a) holiday b) vacation c) leave d) time
9 a) wages b) pay c) subsidies d) benefits
10 a) security b) salary c) wage d) pension
 Exercise 8
Tax quote
Read the following quotes and match them with the appropriate meaning

_____1. “A nation trying to tax itself into A. Only dishonest people cheat on taxes
prosperity is like a man standing in a bucket
and trying to lift himself up by the handle”
Winston Churchill
_____2. “Death and taxes and childbirth! B. Suggest that taxes paid to support
There's never any convenient time for any of education for everyone is necessary for a free
them” country.
Margaret Mitchell
_____3. “The tax which is paid for education C. suggests that if you receive something
is not more than 0.1% of what will be paid to from the government for free, then someone
kings, priests and nobles who will rise up had to pay a tax for it.
among us if we leave the people in
ignorance”
Thomas Jefferson
_____4. “When there is an income tax, the D. People will pay more taxes if they think it
just man will pay more and the unjust less on will make the country better.
the same amount of income.”
Plato
_____5. “For every benefit you receive a tax E. suggests higher spending by the
is levied.” government does not make a country
Ralph Waldo Emerson prosperous
_____6. “There's a lot of evidence you can F. suggest that income taxes forces everyone
convince people on a tax increases if they to cheat.
think it's an investment”
Bill Clinton
_____7. “The income tax created more G. suggests that Politicians would not
criminals than any other single act of promise big things if we thought about how
government.” much we will pay for it in Taxes.
Barry Goldwater
_____8. “Elections should be held on April H. Taxes are a fact of life
16th- the day after we pay our income taxes.
That is one of the few things that might
discourage politicians from being big
spenders.”
Thomas Sowell
_____9. “Tax reform means, 'Don't tax I. suggest that taxes makes a group of people
you, don't tax me. Tax that fellow behind the who do nothing for society but take money
tree.'” from people who do make things for society
Russell B. Long
_____10. “Taxation tends to create a class of J. suggests that laws that are design to make a
people who do not work… to take from those tax more fair only means that you want a tax
who do work and make things…, and to give on someone besides you and your friend.
it to those who do not work”
William Cobbett
 Exercise 9
Multiple Choice
Adapted from exercises from www.businessenglishsite.com/esl-business

1. You can give _________________ 6. Many people use software to prepare their
13,000€ yearly without having to pay the tax __________.
"gift tax". a. resources
a. up to b. files
b. up c. returns
c. to
2. Your "_________________ income" refers 7. Here are some examples of filing
to all your income from taxable sources, __________________: single, married filing
before any exemptions, deductions etc. jointly, married filing separately, etc.
a. net a. status
b. gross b. states
c. itemized c. statements
3. To deduct is to ____________ 8. On tax forms, the most common way to
a. minus refer to one's husband or wife is
b. take "__________________".
c. subtract a. mate
b. spouse
c. ball and chain
4. The fastest way to file your tax return is 9. I had to pay _______ taxes (from the
__________________. previous year.
a. electrically a. old
b. electorally b. back
c. electronically c. previous
5. A 10% penalty will be ________ if you are 10. You may have to fill out another form if
late paying your taxes you have any _________income.
a. imposed a. extraneous
b. taken b. extra
c. taken off c. additional