Tax Cuts - A Simple Lesson In Economics

This is how the cookie crumbles. Please read it carefully.

Let's put tax cuts in terms everyone can understand. Suppose that every
day, ten men go out for dinner. The bill for all ten comes to $100. If
they paid their bill the way we pay our taxes, it would go something
like this:


The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh $7.
The eighth $12.
The ninth $18.
The tenth man (the richest) would pay $59.

So, that's what they decided to do.

The ten men ate dinner in the restaurant every day and seemed quite
happy with the arrangement, until one day, the owner threw them a curve.

"Since you are all such good customers," he said, "I'm going to reduce
the cost of your daily meal by $20."

So, now dinner for the ten only cost $80. The group still wanted to pay
their bill the way we pay our taxes.

So, the first four men were unaffected. They would still eat for free.
But what about the other six, the paying customers? How could they divvy
up the $20 windfall so that everyone would get his 'fair share'?

The six men realized that $20 divided by six is $3.33. But if they
subtracted that from everybody's share, then the fifth man and the sixth
man would each end up being 'PAID' to eat their meal.

So, the restaurant owner suggested that it would be fair to reduce each
man's bill by roughly the same amount, and he proceeded to work out the
amounts each should pay.

And so:
The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33% savings).
The seventh now paid $5 instead of $7 (28% savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).

Each of the six was better off than before. And the first four continued
to eat for free. But once outside the restaurant, the men began to
compare their savings.

"I only got a dollar out of the $20," declared the sixth man. He pointed
to the tenth man "but he got $10!"

"Yeah, that's right," exclaimed the fifth man. "I only saved a dollar,
too. It's unfair that he got ten times more than me!"

"That's true!!" shouted the seventh man. "Why should he get $10 back
when I got only $2? The wealthy get all the breaks!"

"Wait a minute," yelled the first four men in unison. "We didn't get
anything at all. The system exploits the poor!"

The nine men surrounded the tenth and beat him up.

The next night the tenth man didn't show up for dinner, so the nine sat
down and ate without him. But when it came time to pay the bill, they
discovered something important. They didn't have enough money between
all of them for even half of the bill!

And that, boys and girls, journalists and college professors, is how our
tax system works. The people who pay the highest taxes get the most
benefit from a tax reduction. Tax them too much, attack them for being
wealthy, and they just may not show up at the table anymore. There are
lots of good restaurants in Europe and the Caribbean.

David R. Kamerschen, Ph.D.
Distinguished Professor of Economics
536 Brooks Hall
University of Georgia

You could have just posted this and saved your self al lthat typing. I have already posted it a couple times but I can't resist.


Taxes/earners (http://www.rushlimbaugh.com/home/menu/top_50__of_wage_earners_pay_96_09__of_income_taxes .guest.html)

the "rich" 1% also own most things in america. you have more so you give more.

I didn't type it, I cut and pasted.

what ever..

Another example of why the "flat tax" should be institiuted.

Af ter the fall of the Soviet Union - Russia with help from from advisors - had to come up with a new tax system.
Those economic advisors came up with basically a flat tax system which was a tremendous success. Ironically those advisors were American.

he "tax simplification act" passed by congress in the early 90's added over 100 pages to the tax code.

One study said that US business's and individuals spend over 300 billion a year just to figure out taxes.

I'd be all for a flat X%/annum wealth tax, on all domestic properties, owned citizens and non-citizens, with some bookkeeping to make sure that property was only taxed once per year.

It would significantly change the tax load.

And the problem with taxes is they become more complicated when people use them as a tool for social policy. They also become more complicated because of loopholes found by various individuals, requiring more paperwork to fill in. A flat tax wouldn't remove the holes.

a bit off topic

MY TAXES ARE DONE! WRAAA!!! I was able to itemize 10,500$ worth of of deductions!

It would significantly change the tax load.

It'd most likely kill the housing market, too. But at least rents would go up.

bleh. just get rid of income tax and put up a national sales tax

I did this in my CABAL mailing list (An ultra-secret mailing list of philosophy degree majors who have little else to do but talk to one another)

As I explained, the issue really isn't how much they pay for the meal, but how much they have in their wallet after they pay for food (Necessities)

The poor people don't even have enough money to pay for all their meals. If not for the rich people they would starve. Is it not somewhat repugnant that 40% of the people in our country are at or near that state?

The rich people can not only afford their meals, they also get luxury condos, yahts, all manner of nifty perks. In addition, they pass their money to their children who do nothing to diserve it, but still get all the same perks or better.

It is a myth, or near myth to believe that people grow up poor and end up rich. For every 1 person you can find that does that, I'll show a few million who dont. Generally you end up slightly better economically than your parents, but that is still a losing argument for the lower class.

Lets assume that every generation makes 10% more than their previous generation. Then we have A who makes $10,000 a year and B who makes $1,000,000 a year

Generation 1: A) $10,000.00 B)$1,000,000 [Gap 990,000]
Generation 2: A) $11,000.00 B)$1,100,000 [Gap 1,089,000]
Generation 3: A) $12,100.00 B)$1,210,000 [Gap 1,197,900]
Generation 4: A) $13,210.00 B)$1,321,000 [Gap 1,307,790]

So, as you see, assuming a normal variation on both sides, the gap between the rich and the poor grows. The Rich get richer and the poor get poorer.

So, the idle rich can afford to fork over a few meals. They are making their money on the sweat of the poor anyway.