Kimberly Farmer / Unsplash

Kimberly Farmer / Unsplash

Opinion: The relationship between financial literacy and paying taxes

Paying state and local taxes will be part of the household budgets they learn to manage.

  • By Rich Moniak
  • Friday, May 5, 2023 9:30am
  • Opinion

At a Senate Finance Committee hearing last week, Sen. Click Bishop, R-Fairbanks, talked about remembering “some of the main tenets” he learned from a personal finance class he took about 48 years ago. Now, a bill he’s co-sponsoring may help prepare high school students to better manage their personal finances when they become adults. And prevent their generation from drowning in debt like so many Americans are today.

Sen. Bill Wielechowski, D-Anchorage, is the primary sponsor of Senate Bill 99 – “An Act establishing a financial literacy education program for public schools.” This great piece of legislation has earned support from senators on both sides of the aisle.

But let me suggest a follow-on course is needed to help students understand why paying state and local taxes will be part of the household budgets they learn to manage.

One goal of SB 99 is to teach students the consequences of incurring unnecessary credit card debt. The average annual interest rate on a credit card is 18% and can be twice that high. That makes it incredibly difficult to pay off large balances.

According to the most recent data compiled by the Federal Reserve, Americans are carrying a credit card debt of close to $1 trillion. Alaska, which can boast of being among the states with the highest median household income, embarrassingly owns the highest per capita credit card debt.

Those are ironic statistics considering how often we hear public criticism that the federal government doesn’t balance its books like private businesses do.

For young people graduating from high school, and college graduates with loans to pay off, staying out of debt entirely takes an enormous amount of discipline. Above all else, the costs of basic necessities need to be prioritized. Borrowing for the purchase of nonessential items isn’t wise.

In most places, owning a car will be a necessary expense. Associated with that is the cost of liability insurance. And one of the requirements of SB 99 is to teach students the “basic principles of personal insurance policies.”

Someone must cover the medical expenses of anyone injured in a serious accident, as well as the cost of repairs or replacement of any vehicle damaged in the crash. If the driver at fault is uninsured and not capable of covering those costs themselves, that places a financial burden on the rest of society.

That’s why liability insurance is required by law. In a way, it acts like a redistributed tax. The premiums collected by the insurance companies goes into a pot that they’ll disburse to parties harmed by accidents they didn’t cause.

The only reference to taxes in SB 99 is the “basic computation of federal income taxes.” That’s a ‘how to’ exercise without the ‘why’ as I’ve described above.

Now, I don’t expect any high school curriculum to dissect the federal government’s budget and growing debt. But just as students need to understand the purpose of insurance policies, there should be adequate classroom instruction that addresses why state and local governments collect taxes.

Someday, many of them will want to buy homes. They shouldn’t be surprised when monthly mortgage payments include an escrow for property tax and homeowner’s insurance. The insurance will cover catastrophic loss due to a fire. But no one wants their home to burn down to the ground. That’s why fire departments are funded with our property tax dollars.

They also fund police departments, public education, snow plowing and so much more.

Knowing all that isn’t necessary for a person to make smart financial decisions. But the fact is governments can’t exist without collecting taxes. And tax increases or cuts will have an impact on everyone’s personal budget. Some are justified, others aren’t. Either way, it’s impossible to offer intelligent support or opposition without some basic understanding of what our tax dollars do.

“Giving students a well-rounded financial literacy education will help Alaskans save, avoid debt, and improve the Alaskan economy” Wielechowski wrote in his sponsor statement. “It will also help reduce reliance on social programs funded and administered by the state.”

In other words, just like any well-designed civics course, one in financial literacy will help students become better citizens. We should connect the two with a course dedicated to teaching them the primary functions and costs of self-governance.

• Rich Moniak is a Juneau resident and retired civil engineer with more than 25 years of experience working in the public sector. Columns, My Turns and Letters to the Editor represent the view of the author, not the view of the Juneau Empire. Have something to say? Here’s how to submit a My Turn or letter.

More in Opinion

Web
Have something to say?

Here’s how to add your voice to the conversation.

Deena Bishop, commissioner of the Department of Education and Early Development, discusses the status of school districts’ finances during a press conference with Gov. Mike Dunleavy at the Alaska State Capitol on Thursday, April 17, 2025. (Jasz Garrett / Juneau Empire)
Opinion: The fight to improve public education has just begun

We owe our children more than what the system is currently offering

The author and her husband carry an American flag during the Fourth of July parade, Friday, July 4, 2025, in Juneau, Alaska. (Photo courtesy Kate Troll)
My Turn: Claiming the flag on the Fourth of July

Now, here cheering the flag were other immigrants with an uncertain future. What were they cheering about?

Doug Mills/The New York Times file photo 
President Donald Trump and President Vladimir Putin of Russia at a joint news conference in Helsinki, Finland, July 16, 2018.
Opinion: Mistaking flattery for respect

Last Monday, Israeli Prime Minister Benjamin Netanyahu nominated President Donald Trump for… Continue reading

Win Gruening (courtesy)
My Turn: The millions add up. CBJ, get a grip on spending.

Ignoring essential basic services while spending money on projects and services that few want or need doesn’t make Juneau more affordable

(Juneau Empire file photo)
My Turn: Murkowski bought time for a new governor to do better

The senator said she added a provision that delays new federal penalties on Alaska for its high error rate in processing SNAP benefits.

Alexander B. Dolitsky
My Turn: When a writer’s courage against antisemitism shook a nation

Courage is doing what is necessary even when it’s difficult or scary.

Juneau Empire file photo
My Turn: At least you feel bad about the bill

Sen. Murkowski, you cannot say you voted with Alaskans in mind.

Cynthia Fancyboy (Courtesy photo)
My Turn: Cutting Medicaid hurts Alaska’s small villages and our children

Without Medicaid, I couldn’t afford the doctor visits, surgeries, medications, and hospital stays that have kept me healthy and working for Alaska’s kids over the years.

From left, Senators Lisa Murkowski (R-Alaska) and Susan Collins (R-Maine) head to the Senate chamber at the Capitol in Washington on Tuesday morning, July 1, 2025. Senate Republicans were racing on Tuesday morning to lock down the votes to pass their sweeping tax and domestic police bill, after an all-night session of voting and negotiating with holdouts left Trump’s agenda hanging in the balance. (Tierney L. Cross/The New York Times)
My Turn: Murkowski’s moment of shame

She has no excuse for not following the model Sen. Joe Manchin, D-W.Va., set when he killed Joe Biden’s biggest initiative in 2021.

Gov. Mike Dunleavy speaks about his decision to veto House Bill 57 during a press conference at the Alaska State Capitol on Monday, May 19, 2025. (Jasz Garrett / Juneau Empire file photo)
Opinion: Governor deposits a veto to help predatory lenders

Thousands of Alaskans get so squeezed on their finances every year that… Continue reading

Deven Mitchell is the executive director and chief executive officer of the Alaska Permanent Fund Corp. (Photo courtesy of the Alaska Permanent Fund Corp.)
Opinion: The key to a stronger fund: Diversification

Diversification is a means of stabilizing returns and mitigating risk