1. 12 The Design of the Tax System CHAPTER
In earlier chapters, students learned some important lessons about taxes, including: the effects of a tax on the allocation of resources, tax incidence, and the deadweight loss of a tax.
In this chapter, students will learn about topical policy issues such as:
the “marriage penalty”
income vs. consumption tax
the corporate income tax
Students will also learn the difference between progressive and regressive taxes, marginal and average tax rates, and various criteria for evaluating tax systems.
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

2. Look for the answers to these questions:
What are the largest sources of tax revenue in the U.S.?
What are the efficiency costs of taxes?
How can we evaluate the equity of a tax system?
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

3. Introduction ‘A government can sometimes improve market outcomes’
Providing public goods
Regulating the use of common resources
Remedying the effects of externalities
The government
Raises revenue through taxation
To perform its many functions
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

4. Introduction Lessons about taxes from earlier chapters:
A tax on a good reduces the market quantity of that good.
The burden of a tax is shared between buyers and sellers depending on the price elasticities of demand and supply.
A tax causes a deadweight loss.
An Overview of U.S. Taxation
- How tax revenue as a share of national income has changed over time
- How the U.S. tax revenues compare to other countries
- The most important revenue sources for federal, state, and local government
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

5. Government Revenue as a Percentage of GDP: Changes over Time
This figure shows revenue of the federal government and of state and local governments as a percentage of gross domestic product (GDP), which measures total income in the economy. It shows that the government plays a large role in the U.S. economy and that its role has grown over time.
Government receipts include: tax revenue, contributions to social insurance programs, and income from government-owned assets.
From 1929 to the late 1990s, government receipts increase from 10% to 30% of GDP.
Note, however, that receipts as a % of GDP tend to be lower in recessions than in booms, as the graph clearly shows in 2001–2002 and again in 2008– Since the first ten years of data in this graph correspond to the Great Depression, we might get a more accurate sense of the long-run trend if we focus on the period starting after the end of the Great Depression and ending before the “Great Recession” of 2008– From 1940 to 2007, total receipts increase from 16% to 30% - still a huge increase, but less dramatic than for the period beginning in 1929.
Sources: Economic Report of the President Table 15.1, Historical Statistics of the United States, Bureau of Economic Analysis
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

6. An Overview of U.S. Taxation
Government revenue - increased
As percentage of total income
As economy’s income has grown
Government’s revenue from taxation has grown even more
As a nation gets richer
Government - takes a larger share of income in taxes
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

7. Government Revenue as a Percentage of GDP: International Comparisons
Tax revenue (relative to GDP) varies across countries. For the countries included in this table, the U.S. is roughly in the middle. Europe is generally higher, while lower-income countries are generally lower.
Source: OECD, United Nations. Data are for 2013.
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

8. Receipts of the Federal Government: 2016 Q1
Amount
(billions)
per person
Percent
of receipts
Personal current taxes
$1,572.8
$4,865.3
45.0%
Social insurance
1,224.1
3,786.6
35.1
Taxes on corporate income
410.6
1270.2
11.8
Others
284.2
879.1
8.1
Total
$3,491.7
$10,801.2
100.0%
Personal income tax is typically the largest source of revenue for the U.S. federal government; it is based on total income (wages, interest, dividends, profits)
Social insurance taxes (Payroll taxes) (Social Security, Medicare, etc.): a tax on the wages that a firm pays its workers.
Corporate income tax: tax on profits.
Corporate profits are taxed twice: 1. Corporate income tax when the corporation earns the profits and 2. Individual income tax when the corporation uses its profits to pay dividends to its shareholders.
Source: NIPA, Table 3.2, Bureau of Economic Analysis, U.S. Department of Commerce, available here:
Source for population: U.S. Census. I used the April 1, 2016 estimate (323,268,851) from
file: NA_EST xls
Table 1
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

9. Receipts of the State and Local Government: 2016 Q1
Amount
(billions) 
per person
Percent
of receipts
Sales taxes
$549.5
$1,699.8
34.7%
Property taxes
466.3
1,442.5
29.5
Personal income taxes
419.0
1,296.1
26.5
Corporate income taxes
58.5
181.0
3.7
Other
88.3
273.1
5.6
Total
$1,581.6
$4,892.5
100.0%
The most important revenue sources for state and local governments are funds from the federal government and revenue from sales and property taxes (more than 40% of receipts). Income taxes are also important in many states.
Sales tax: percentage of total amount spent at retail stores
Property taxes: Percentage of estimated value of land and structures - paid by property owners
Source: NIPA, Table 3.3, Bureau of Economic Analysis, U.S. Department of Commerce, available here:
Source for population: U.S. Census. I used the April 1, 2016 estimate (323,268,851) from
file: NA_EST xls
Table 1
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

10. Taxes and Efficiency Policymakers Costs of taxes to taxpayers
Equity and efficiency
Costs of taxes to taxpayers
Tax payment itself
Deadweight losses
Taxes distort the decisions that people make
Administrative burdens
Taxpayers bear as they comply with the tax laws
One tax system is more efficient than another if it raises the same amount of revenue at a smaller cost to taxpayers
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

11. Taxes and Efficiency ‘People respond to incentives’
Taxes distort incentives
Cause people to allocate resources according to tax incentives rather than true costs and benefits
Deadweight loss
The fall in taxpayers’ well-being exceeds the revenue the government collects
Deadweight loss was covered extensively in Chapter 8. Any students needing review should read the brief example at this point in Chapter 12, which very clearly recaps the idea of a deadweight loss from taxation in the context of a simple example.
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

12. Should income or consumption be taxed?
Income tax reduces the incentive to save:
If income tax rate is 25%, then 8% interest rate = 6% after-tax interest rate.
The lost income compounds over time.
Some economists advocate taxing consumption instead of income.
Would restore incentive to save.
Better for individuals’ retirement income security and long-run economic growth.
The material on this slide corresponds to a case study in the chapter.
See the textbook for a dramatic example of the income tax disincentive to saving.
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

13. Should income or consumption be taxed?
Consumption tax-like provisions in the U.S. tax code include Individual Retirement Accounts, 401(k) plans.
People can put a limited amount of saving into such accounts.
The funds are not taxed until withdrawn at retirement.
Europe’s Value-Added Tax (VAT) is like a consumption tax
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

14. Taxes and Efficiency Administrative burden
Includes the time and money people spend to comply with tax laws
Encourages the expenditure of resources on legal tax avoidance
e.g., hiring accountants to exploit “loopholes” to reduce one’s tax burden
Is a type of deadweight loss
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

15. Taxes and Efficiency Administrative burden
Could be reduced if the tax code were simplified
But would require removing loopholes, politically difficult
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

16. Taxes and Efficiency Average tax rate Marginal tax rate
Total taxes paid divided by total income
Measures the sacrifice a taxpayer makes
Marginal tax rate
The extra taxes paid on an additional dollar of income
Measures the incentive effects of taxes on work effort, saving, etc.
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

17. Taxes and Efficiency Lump-sum taxes
Same amount of tax for every person
Example: lump-sum tax = $4000/person
Marginal tax rate
Average tax rate
Income
$20,000
20% 0%
$40,000
10% 0%
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

18. Taxes and Efficiency Lump-sum taxes
Most efficient tax possible: a person’s decisions do not alter the amount owed
Doesn’t distort incentives, doesn’t cause deadweight losses
Imposes a minimal administrative burden
Perceived as unfair:
Relative to income, the poor pay much more than the rich (even though everybody pays the same in $ terms)
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

19. Taxes and Equity Equity
Another goal of tax policy
Distributing the burden of taxes “fairly.”
Agreeing on what is “fair” is much harder than agreeing on what is “efficient.”
Yet, there are several principles people apply to evaluate the equity of a tax system
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

20. Taxes and Equity The benefits principle
People should pay taxes based on the benefits they receive from government services
Tries to make public goods similar to private goods
Example: Gasoline taxes
Amount of tax paid is related to how much a person uses public roads
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

21. Taxes and Equity The ability-to-pay principle
Taxes should be levied on a person according to how well that person can shoulder the burden
All taxpayers should make an “equal sacrifice”
A $10,000 tax bill is a bigger sacrifice for a poor person than a rich person.
Recognizes that the magnitude of the sacrifice depends not just on the tax payment, but on the person’s income and other circumstances.
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

22. Taxes and Equity Vertical equity
Taxpayers with a greater ability to pay taxes should pay larger amounts
Richer taxpayers should pay more than poorer taxpayers
How much more should the rich pay?
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

23. The Burden of Federal Taxes
This is Table 5 from the textbook, related to the case study ‘How the Tax Burden Is Distributed.’
They include all 2011 federal taxes—personal income taxes, payroll taxes, corporate income taxes, and excise taxes—but not state and local taxes.
Are the wealthy paying their fair share of taxes? There is no objective way to make this judgment.
In evaluating the issue for yourself, however, it is useful to know how much families with different incomes pay under the current tax system.
In late 2012, the U.S. Congress passed and President Obama signed a tax bill that increased taxes significantly, particularly for taxpayers at the top of the income distribution. As a result, the tax system in place for 2013 and beyond is more progressive than the one shown in the table.
The Congressional Budget Office projects that for the top 1 percent, taxes as a percentage of income increased from 29.0 to 33.3 percent.
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

24. Three Tax Systems Proportional tax Regressive tax Progressive tax
High-income and low-income taxpayers pay the same fraction of income
Regressive tax
High-income taxpayers pay a smaller fraction of their income than do low-income taxpayers
Progressive tax
High-income taxpayers pay a larger fraction of their income than do low-income taxpayers
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

25. Three Tax Systems Regressive Proportional Progressive 20 40,000 25
25,000
30%
$15,000
Regressive 25
50,000
25,000
25%
$12,500
Proportional 30
60,000 25
25,000
20%
$10,000
Progressive
income
tax
% of income
tax
% of income
tax
% of income
$50,000
100,000
This slide replicates Table 4 in the textbook.
Point out that even a regressive income tax satisfies vertical equity, as vertical equity only requires that the dollar amount of taxes rise with income, not the average tax rate.
A few more details about the proportional tax:
- Typically, income above a certain threshold is taxed at a constant rate.
- The higher the threshold, the more progressive the tax.
- Sharply reduces administrative burden
- Not popular with people who benefit from the complexity of the current system (accountants, lobbyists); people who can’t imagine life without their favorite deduction/loophole
- Used in some central/eastern European countries
200,000
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

26. The Federal Income Tax Rates: 2014
The tax rates in this table are for single filers. Source: tax rate schedule,
Note on interpreting the table: The tax rates shown are marginal tax rates that apply only to income in the corresponding brackets. For example, a person earning $30,000 would pay 10% on the first $9,075 of income, and 15% on income above $9,075. He would not pay 15% on his ENTIRE income.
As the table shows, the U.S. income tax is progressive. This table excludes transfer payments, which accrue mainly to lower income persons. Factoring in transfer payments, the system looks even more progressive.
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

27. Taxes and Equity Horizontal equity
Taxpayers with similar abilities to pay taxes should pay the same amount
Special provisions that alter a family’s tax based on its specific circumstances
Problem: Difficult to agree on what factors, besides income, determine ability to pay
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

28. Active Learning 1 Taxes and marriage, part 1
The income tax rate is 25%. The first $20,000 of income is excluded from taxation. Tax law treats a married couple as a single taxpayer. Sam and Diane each earn $50,000.
i. If Sam and Diane are living together unmarried, what is their combined tax bill?
ii. If Sam and Diane are married, what is their tax bill?
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

29. Active Learning 1 Answers
If unmarried, Sam and Diane each pay 0.25 x ($50,000 – 20,000) = $7500 Total taxes = $15,000 = 15% of their joint income. If married, they pay 0.25 x ($100,000 – 20,000) = $20,000 or 20% of their joint income. The $5,000 increase in the tax bill is called the “marriage tax” or “marriage penalty.”
In this exercise, Sam and Diane’s problem arises because, as singles, each enjoys a $20,000 income exclusion, so the first $40,000 of their combined income is excluded from taxes. As a married couple, only the first $20,000 of income is excluded.
One way to fix this is to double the exclusion for married couples relative to single tax filers. But doing so causes another problem, as we will see in the second part of this exercise…
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

30. Active Learning 1 Taxes and marriage, part 2
The income tax rate is 25%. For singles, the first $20,000 of income is excluded from taxation.
For married couples, the exclusion is $40,000.
Harry earns $0. Sally earns $100,000.
i. If Harry and Sally are living together unmarried, what is their combined tax bill?
ii. If Harry and Sally are married, what is their tax bill?
Here, we have changed the tax code to eliminate the marriage penalty that couples like Sam and Diane face: we have doubled the exclusion for married couples.
However, this creates a different kind of problem for other couples, as students will learn when they work through this exercise.
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

31. Active Learning 1 Answers
If unmarried, Harry pays $0 in taxes. Sally pays: 0.25 x ($100,000 – 20,000) = $20,000 Total taxes = $20,000 = 20% of their joint income. If married, they pay 0.25 x ($100,000 – 40,000) = $15,000 or 15% of their joint income. The $5000 decrease in the tax bill is called the “marriage subsidy.”
A little bit more about marriage taxes and subsidies (though not in the textbook, relevant to the active learning example)
- In the current U.S. tax code, couples with similar incomes are likely to pay a marriage tax.
- Couples with very different incomes are likely to receive a marriage subsidy.
Many have advocated reforming the tax system to be neutral with respect to marital status.
The ideal tax system would have these properties:
- Two married couples with the same total income pay the same tax (horizontal equity).
- Marital status does not affect a couple’s tax bill (horizontal equity).
- A person/family with no income pays no taxes (vertical equity).
- High-income taxpayers pay a higher fraction of their incomes than low-income taxpayers (vertical equity).
However, designing a tax system with all four of these properties is mathematically impossible.
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

32. Taxes and Equity Tax incidence Taxes alter supply and demand
Who bears the burden of taxes
Central to evaluating tax equity
Person who bears the burden a tax
Not always the person who gets the tax bill from the government
Taxes alter supply and demand
Alter equilibrium prices
Indirect effects
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

33. Taxes and Equity Example: A tax on fur coats
May appear to be vertically equitable
But furs are a luxury with very elastic demand
The tax shifts demand away from furs, hurting the people who produce furs (who probably are not rich)
When evaluating tax equity, must take tax incidence into account.
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

34. Who pays the corporate income tax?
People pay all taxes
Tax on a corporation
Corporation – more like a tax collector than taxpayer
Burden of the tax ultimately falls on people
Workers and customers bear much of the burden of the corporate income tax
Popular because it appears to be paid by rich corporations
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

35. Who pays the corporate income tax?
Suppose the government levies a tax on automakers:
Owners receive less profit, may respond over time by shifting their wealth out of the auto industry.
The supply of cars falls, car prices rise, car buyers are worse off.
Demand for auto workers falls, wages fall, workers are worse off.
The corporate income tax is popular among voters. After all, corporations are not people. Voters are always eager to have their taxes reduced and have some faceless corporation pick up the tab.
But if the true incidence of the corporate income tax were widely understood, it might be much less popular.
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

36. Trade-off: Equity vs. Efficiency
Equity and efficiency
Most important goals of a tax system
Often conflict
Political leaders differ in their views on this tradeoff
Economics can help us:
Better understand the tradeoff
Avoid policies that sacrifice efficiency without any increase in equity
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

37. Summary The U.S. government raises revenue using various taxes
Federal government: personal income taxes and payroll taxes for social insurance.
State and local governments: sales taxes and property taxes.
The efficiency of a tax system refers to the costs it imposes on taxpayers.
Deadweight loss: taxes alter incentives
Administrative burden of complying with the tax laws.
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

38. Summary
The equity of a tax system concerns whether the tax burden is distributed fairly among the population.
Benefits principle: it is fair for people to pay taxes based on the benefits they receive from the government.
Ability-to-pay principle: it is fair for people to pay taxes based on their capability to handle the financial burden.
The distribution of tax burdens is not the same as the distribution of tax bills.
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

39. Summary
When considering changes in the tax laws, policymakers often face a trade-off between efficiency and equity.
Much of the debate over tax policy arises because people give different weights to these two goals.
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.