A Lesson in Taxation
Politicians can exclaim; "It's just a tax cut for the rich!!", and it
is just accepted to be fact. But what does that really mean?
Just in case you are not completely clear on this issue, we hope the following will help:
Tax Cuts - A Simple Lesson in Economics.
This is how the cookie crumbles. Please read it carefully.
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 $100.00. If
they paid their bill the way we pay our taxes, it would go something
The first four men (the poorest) would pay nothing.
The fifth would pay $1.00
The sixth would pay $3.00
The seventh $7.00
The eighth $12.00
The ninth $18.00
The tenth man (the richest) would pay $59.00
So, that's what they decided to do
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 $20.00"
now dinner for the ten only cost $80.00. 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 $20.00 windfall
so that everyone would get his "fair share"?
The six men
realized that $20.00 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 $2.00 instead of $3.00 (33% savings)
The seventh now paid $5.00 instead of $7.00(28% savings)
The eight now paid $9.00 instead of $12.00 (25% savings)
The ninth now paid $14.00 instead of $18.00 (22% savings)
The tenth now paid $49.00 instead of $59.00 (16% savings)
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 $20.00", declared the
sixth man. He pointed to the tenth man "but he got $10.00!"
"Yeah, that's right", exclaimed the firth 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 $10.00 back when I got only $2.00?? 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"!!
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 are perceived to 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.
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