Tax cuts- A simple lesson in economics
Tax cuts- A simple lesson in economics
by RCglider » Thu Mar 18, 2004 1:52 pm
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.
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.
- Folic_Acid
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by Folic_Acid » Thu Mar 18, 2004 1:59 pm
/me salutes RCglider 
Right on - that's a great analogy!
I still can't understand why people in the US complain about "tax cuts for the rich" when everyone got a cut.
Right on - that's a great analogy!
I still can't understand why people in the US complain about "tax cuts for the rich" when everyone got a cut.
- Murgatroyd
by Murgatroyd » Thu Mar 18, 2004 2:09 pm
Originally posted by Folic_Acid
/me salutes RCglider
Right on - that's a great analogy!
I still can't understand why people in the US complain about "tax cuts for the rich" when everyone got a cut.
My biggest thing is - aren't the "rich" wealthy because they earned that money? Even if it's inherited, it was still earned at some point in time. Therefore, don't they deserve to keep more of their money because, well, they earned it? Man, people need to get with capitalism.. the reason we're so technologically advanced is because it pays to be innovative.
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by SavageParrot » Thu Mar 18, 2004 2:17 pm
'From each according to their means to each according to their needs.'
I like this idea more than your system in the US where you pay out 3 times more in corporate aid (to companies who yearly post billion dollar profits while downsizing thir workforce) than you do in welfare to people who are dying in their droves due to inadequate healthcare. I say fuck the tenth man, he wouldn't have so much money anyway if he hadn't laid off the other 9 men and moved their jobs to a sweat shop in Indonesia where the employes get paid a dollar a day to work 14 hours a day seven days a week in shit conditions, to make crappy shoes/cars/clothing. Hell I'm not even sure he qualifies as a man!
I like this idea more than your system in the US where you pay out 3 times more in corporate aid (to companies who yearly post billion dollar profits while downsizing thir workforce) than you do in welfare to people who are dying in their droves due to inadequate healthcare. I say fuck the tenth man, he wouldn't have so much money anyway if he hadn't laid off the other 9 men and moved their jobs to a sweat shop in Indonesia where the employes get paid a dollar a day to work 14 hours a day seven days a week in shit conditions, to make crappy shoes/cars/clothing. Hell I'm not even sure he qualifies as a man!
- Murgatroyd
by Murgatroyd » Thu Mar 18, 2004 2:22 pm
Originally posted by SavageParrot
'From each according to their means to each according to their needs.'
I like this idea more than your system in the US where you pay out 3 times more in corporate aid (to companies who yearly post billion dollar profits while downsizing thir workforce) than you do in welfare to people who are dying in their droves due to inadequate healthcare. I say fuck the tenth man, he wouldn't have so much money anyway if he hadn't laid off the other 9 men and moved their jobs to a sweat shop in Indonesia where the employes get paid a dollar a day to work 14 hours a day seven days a week in shit conditions, to make crappy shoes/cars/clothing. Hell I'm not even sure he qualifies as a man!
Well, in that case...
My means: I'll feign injury or even go so far as to inflict it upon myself if I can't keep what I earn.
My needs: Well, seeing as how I can't produce (see above), that you're gonna give it to me. Hope you're happy.
by Tommy Boy » Thu Mar 18, 2004 2:26 pm
don't even get me started about taxes and tax cuts...we Canadians get bent over in a big way when it comes to taxes...how does 40-50% of income (in some tax brackets) going to taxes sound to you?
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by SavageParrot » Thu Mar 18, 2004 2:28 pm
Originally posted by C. Murgatroyd
Well, in that case...
My means: I'll feign injury or even go so far as to inflict it upon myself if I can't keep what I earn.
My needs: Well, seeing as how I can't produce (see above), that you're gonna give it to me. Hope you're happy.
What's the point, with your systm you'd have to pay for the health care anyway.
- Murgatroyd
by Murgatroyd » Thu Mar 18, 2004 2:31 pm
Originally posted by Tommy Boy
don't even get me started about taxes and tax cuts...we Canadians get bent over in a big way when it comes to taxes...how does 40-50% of income (in some tax brackets) going to taxes sound to you?
Sounds like socialism to me! Here's my good buddy the Laffer curve:
Tax rate = 0%, Tax income = 0
Tax rate = 100%, Tax income = 0.
What does this mean? It means that there's a "sweet spot" for taxes (which is why there are staggered tax rates).
If you tell me I'll get to keep 0 of what I earn, I'm not gonna earn anything - it's not worth it. That's the same with other high taxes. Taxes are too low, the government doesn't get much money. Make sense?
That's one of the reasons that I don't believe socialist governments can survive. At least not without a huge capitalist state somewhere else on the planet... wonder who that could be...
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by Major SONAR » Thu Mar 18, 2004 5:22 pm
My best friend suggested that if you make $20 million/year income, then anything after that should be taxed at 95%. I tried to explain to him that when people reached the 20 million mark, they would probably stop working. (He disagreed)
or.. I suggested they would leave this country (USA) and go to another country where they could make all the money they wanted and not be taxed at 95%. (I don't know much about taxation in other countries, so there may not be a country like that)
In any event, I think it's pretty subjective to just pick a number and say this is the cut off... You owe the government 95% of your income, because you're rich!
Pure Socialism... IMHO
Personally I will never be exceedingly rich, so it's not like I have to worry about paying excessivly high taxes. (Taxes are too high as it is now, but that's another story) However, if I do become rich, I don't believe I should be made to pay taxes to support others who choose not to work as hard (or as wisely) as I did.
Any comments?
or.. I suggested they would leave this country (USA) and go to another country where they could make all the money they wanted and not be taxed at 95%. (I don't know much about taxation in other countries, so there may not be a country like that)
In any event, I think it's pretty subjective to just pick a number and say this is the cut off... You owe the government 95% of your income, because you're rich!
Pure Socialism... IMHO
Personally I will never be exceedingly rich, so it's not like I have to worry about paying excessivly high taxes. (Taxes are too high as it is now, but that's another story) However, if I do become rich, I don't believe I should be made to pay taxes to support others who choose not to work as hard (or as wisely) as I did.
Any comments?
Another Awesome Sig by Evan - Thanks man!
- Fat Bastard
by Fat Bastard » Thu Mar 18, 2004 5:40 pm
Well exploiting the poor is funny, because they get most of the taxes in welfare and other such programs. And then they bitch because they didnt get a tax break, HELLO you got to work to get a break sheesh.
Here's my example, true story.
Myself and 2 other guys are repairing some cable in one of the housing projects. When we notice an eviction notice on one of the doors. The girl was 3 months behind on here rent in the projects. Looking at the name on the notice was the name of one of the new girls that got hired. Now whats so funny about this well here total due to avoid eviction was 7 dollars if i recall right. Go figure.
RC great statement
Here's my example, true story.
Myself and 2 other guys are repairing some cable in one of the housing projects. When we notice an eviction notice on one of the doors. The girl was 3 months behind on here rent in the projects. Looking at the name on the notice was the name of one of the new girls that got hired. Now whats so funny about this well here total due to avoid eviction was 7 dollars if i recall right. Go figure.
RC great statement
- SavageParrot
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by SavageParrot » Thu Mar 18, 2004 6:22 pm
Originally posted by Fat Bastard
Well exploiting the poor is funny, because they get most of the taxes in welfare and other such programs.
Remind me what is US defence spending running at nowadays?
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by Colonel Ingus » Thu Mar 18, 2004 6:42 pm
'From each according to their means to each according to their needs.'
You do know who you are quoting don't you? Everywhere his system was tried has failed or is failing. Something to think about there buddy.
And what a load of crap that phrase is. Why should I have to do more work, harder and faster, so that you may enjoy the same standard of living I enjoy for nothing? Whatever happened to EARNING what you get.
And Tommy you may see that much ripped out in front but we get it thru the back door also and the average American pays 56% of their income thru regular taxes, hidden taxes and fees. And we don't even have socialized medicine.
Now I don't mind paying some taxes.
I like having a good road system, police and fire departments, a powerful military, and other sundry benefits of some taxation. I don't even mind social programs but they should be more along the lines of "Hey you fell down, Let me help you get back on your feet" Not "Here I will take care of you from cradle to grave."
But when you tell me it is my duty to care of people who don't even try, who won't even go out and improve themselves and their situation then I draw the line.
Sorry if it bothers people but I prefer a society of strong individuals (What made America great) as opposed to automatons each fit into their own little prescribed niche according to someone elses scheme of where they should fit.
"They that can give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety." ... Benjamin Franklin
- Fat Bastard
by Fat Bastard » Thu Mar 18, 2004 7:18 pm
Originally posted by Colonel Ingus
I like having a good road system, police and fire departments, a powerful military, and other sundry benefits of some taxation. I don't even mind social programs but they should be more along the lines of "Hey you fell down, Let me help you get back on your feet" Not "Here I will take care of you from cradle to grave."
Man Ingus hit this on the head, I get a report on my social security earnings every year and the sad thing is, if i can trick the system and claim some bullshit illness, I'll get over 1300 a month. Now if i work til im 59 I'll only make around 800 now if i work til 65 i'll get close to 1000 a month. So makes you wonder why work, let ever other SOB work and you claim some BS illness like alot of people. Not to mention all you young guys & gals better start saving for retirement now because even though your be paying into social security you wont get any
can we say suckers. A friend of my wife who is only in here 20's got a letter from the SS office stating she wont be recieving any 
even though she works.
I could go on but point has been made.
- Fat Bastard
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