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Today's Economic Lesson in Taxation


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Today's Economic Lesson in Taxation

Let's put tax cuts in terms everyone can understand. Suppose that every day,

10 men go out for dinner. The bill for all 10 comes to $100.

If they paid their bill the way we pay our taxes, it would go something like


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 10th man (the richest) would pay $59.

That's what they decided to do. The 10 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.'

Now dinner for the 10 only cost $80. The group still wanted to pay their

bill the way we pay our taxes.

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.

He proceeded to work out the amounts (percentage) each should pay.

And so:

The fifth man, like the first four, now paid nothing (100 percent savings).

The sixth now paid $2 instead of $3 (33 percent savings).

The seventh now paid $5 instead of $7 (28 percent savings).

The eighth now paid $9 instead of $12 (25 percent savings).

The ninth now paid $14 instead of $18 (22 percent savings).

The 10th now paid $49 instead of $59 (16 percent 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 10th 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 10 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 10th and beat him up.

The next night the 10th 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


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.

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Ahh, you guys shilling for the rich ... 'twasn't only Lenin to employ the notion of "useful idiots" ... wink.gif

Let's play with your analogy a little. Of the four who paid nothing, there was one paraplegic in a wheelchair, a widowed aunt "right"-sized out of a job, one freeloading brother-in-law, a kid in school, and six others gainfully employed at various pay levels (well, the rich guy at the top derived a lot of his income from inheritance). The meals varied considerably in quality from top to bottom. In response to grumbling (and a small gift) from the rich guy, the restauranteur lowered the price as noted. Then, in recovery, he also lowered the quality of the meals, disproportionately on those at the lower end of the scale, and instituted a flat $3 cover charge (user fee) levied on each individual as they entered the establishment. In contemplation of maintaining a comfortable pew in the afterlife, the others agreed to a $0.75 surcharge ($6) to cover the the invalid and the widow. The result:

The third guy (the freeloader) was supposed to pay $3.75, but sneaked in the back door.

The fourth man (the student) now paid $3.75 instead of nothing ( blink.gif %? increase)

The fifth man now paid $3.75 instead of $1 (275% increase).

The sixth now paid $5.75 instead of $3 (91% increase).

The seventh now paid $8.75 instead of $7 (25% increase).

The eighth now paid $12.75 instead of $12 (6% increase).

The ninth now paid $17.75 instead of $18 (1.5% savings ...

... so they can't say it all went to the guy who sought [& paid for] these changes in the first place laugh.gif )

The 10th now paid $52.50 instead of $59 (11% savings).

All in fun

Cheers, IFG [oops! slight math correction rolleyes.gif - "moral of the story" stays the same biggrin.gif]

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