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 even 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.
(Hat tip to Dopple-G)
Excellent analysis. Good job.
I love it.
in direct terms....the US income tax system is designed to move money from the most productive in our society to the least productive.
Oh if ONLY Atlas would shrug.
Unfortunately, lots of rish folks (John Kerry's ilk) actually feel BAD about being rich. So, instead of not putting up with the crap any longer, they try to sign themselves and everyone else up for more.
What happened to the last dollar?
2+5+9+14+49=79
The last dollar went to the same place where all of the lost socks end up. We call it roundyland and it sits just outside the orbit of Uranus.
Tax Cuts: A Simple Lesson in Economics
Adapted by Steven M. Schultz
Let's put tax cuts in terms everyone can understand. Suppose that every day, ten people go out for dinner: Martha Stewart, Jeff Skilling, Paris Hilton, Lizzie Grubman, one Emergency Room nurse, one U.S. Marine Corps Sergeant, and four Elementary School teachers. 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 teachers would pay nothing for dinner, but would each have to pay their babysitters $15 for the evening
• The Sergeant of Marines would pay $1
• The nurse would pay $3
• Lizzie Grubman would owe $7, but pay $5.50, claiming that she gave the other $1.50 to “some lowlife who begged me for change”.
• Paris Hilton would pay $12, even though the money in her trust fund could buy the restaurant several hundred times over
• Jeff Skilling would offshore his earnings to make it appear that he only owed $3, which he would pay by selling a fake Rolex that didn’t work to the Marine
• Martha Stewart would hire a lawyer for $5 to make sure she didn’t have to pay for dinner at all
• The restaurant owner would have to eat his $70.50 decrease in revenue, which would drive his Net Margin for the night to 2.8%
So, that's what they decided to do.
The ten 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 $10. I guess I’ll figure out how to pay for rewarding for your loyalty some other time; heck, I’m selling the restaurant in four years anyway.” So now the dinner bill for the ten was only $90.
The group still wanted to pay their bill the way we pay our taxes. So, the teachers were unaffected. They would still eat free, and still pay their babysitters. But what about the other six, the paying customers? How could they divvy up the $10 windfall so that everyone would get his 'fair share'? The six realized that $10 divided by six is $1.67. But if they subtracted that from everybody's share, then the Marine Sergeant ends up being paid to eat his meal.
So, the restaurant owner suggested that it would be fair to give each of the first six a quarter, totaling $1.50, and reduce each of the other four’s respective bills by 50%. And so:
• Of course, this didn’t affect Martha Stewart
• Jeff Skilling sold another non-working watch to the Marine (to replace the first non-working one) for another $3, and pocketed the additional $1.50.
• Lizzie and Paris respectively got bills for $3.50 and $6, which they paid
• The teachers, the nurse, and the Marine each bought a pack of gum after dinner with the quarters they’d received, and thanked the restaurant owner profusely for his magnanimity
• The restaurant owner grossed $9.50 from the ten for the evening, which was $41.50 short of his cost of providing the meal. He promptly announced his plans to acquire the restaurants on either side of him, and the one across the street.
But once outside the restaurant, the ten began to compare their savings. "I only got a $6 out of the $10," declared the Paris Hilton, “or that’s what my accountant told me. That’s NOT hot.” Martha complained “I can’t believe you’re whining about this; I didn’t get ANY of the savings at all!” She pointed to Jeff Skilling "he basically got the rest." "Yeah, that's right," exclaimed Lizzie. "I only saved two fuckin’ bucks. If it weren’t for these loser poor people, we’d all be able to have an even better meal, anyway.” Skilling remained quiet, saying only "How can I be expected to know what’s been going on?" "Wait a minute," yelled Martha, Lizzie, and Paris. “The system exploits the rich! We’re tired of having to support these freeloaders!” They then surrounded the teachers, the nurse, and the Marine, gave them lessons on how to be better people and make more money, and then took their quarters as a fee.
The next night Skilling didn't show up for dinner, and neither did the teachers, the nurse, or the Marine (who had been sent to Iraq), so Lizzie, Paris, and Martha sat down and ate together. But when it came time to pay the bill, they discovered something important. They didn't have enough money between them for even 1/10 of the bill! So they ordered more food, and some Cosmopolitans, and figured “If we’re drunk enough, paying the bill won’t matter.” And the restaurant owner agreed.
And that, boys and girls, journalists and college professors, is how our tax system really works.
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