Tax cuts in terms everyone can understand
>> Sometimes politicians, journalists and others 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, I > >> hope the following will help. Please read it carefully. > >> > >> Let's put tax cuts in terms everyone can understand. > >> > >> Suppose that every day, ten men go out for dinner and 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 would pay $7. > >> > >> The eighth would pay $12. > >> > >> The ninth would pay $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." Dinner for the ten now > >> cost just $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 men - the paying customers? How > >> could they divide the $20 windfall so that everyone would get his > >> 'fair share?' > >> > >> They 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 two? 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 anymore. In fact, > >> they might start eating overseas where the atmosphere is somewhat > >> friendlier. > >> > >> David R. Kamerschen, Ph.D > >> Professor of Economics > >> University of Georgia |
All times are GMT -5. The time now is 12:08 AM. |
© 2024 MH Sub I, LLC dba Internet Brands