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Tax Cuts Explained
from David R. Kamerschen, Ph.D. Professor of Economics 536 Brooks HallUniversity of Georgia
Let's put tax cuts in terms that everyone can understand. Suppose that everyday, ten men go out for dinner. The bill for all ten comes to $100. If theypaid 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 happywith 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 thecost of your daily meal by $20.
"Now, the 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 upthe $20 windfall so that everyone would get his 'fair share'?
The six men realized that $20 divided by six is $3.33. But if theysubtracted that from everybody's share, then the fifth man and the sixth manwould each end up being 'PAID' to eat their meal. So, the restaurant ownersuggested that it would be fair to reduce each man's bill by roughly thesame 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 (29% 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 $50 instead of $59 (15% savings).
Each of the six was better off than before. And the first four continued toeat for free. But once outside the restaurant, the men began to comparetheir savings.
"I only got a dollar out of the $20," declared the sixth man. He pointed tothe tenth man "but he got $9!"
"Yeah, that's right," exclaimed the fifth man. "I only saved a dollar too.It's unfair that he got nine times more than me!"
"That's true!!" shouted the seventh man. "Why should he get $9 back when Igot only $2? The wealthy get all the breaks!"
"Wait a minute," yelled the first four men in unison. "We didn't getanything 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 downand ate without him. But when it came time to pay the bill, they discoveredsomething important. They didn't have enough money between all of them foreven half of the bill!
And that, boys and girls, journalists and college professors, is how our taxsystem works. The people who pay the highest taxes get the most benefit froma tax reduction. Tax them too much, attack them for being wealthy, and theyjust may not show up at the table anymore. There are other places offshorewith nice restaurants and good business opportunities.
DEFEAT SOCIALISM - VOTE ACCORDINGLY
Tax Cuts Explained
from David R. Kamerschen, Ph.D. Professor of Economics 536 Brooks HallUniversity of Georgia
Let's put tax cuts in terms that everyone can understand. Suppose that everyday, ten men go out for dinner. The bill for all ten comes to $100. If theypaid 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 happywith 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 thecost of your daily meal by $20.
"Now, the 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 upthe $20 windfall so that everyone would get his 'fair share'?
The six men realized that $20 divided by six is $3.33. But if theysubtracted that from everybody's share, then the fifth man and the sixth manwould each end up being 'PAID' to eat their meal. So, the restaurant ownersuggested that it would be fair to reduce each man's bill by roughly thesame 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 (29% 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 $50 instead of $59 (15% savings).
Each of the six was better off than before. And the first four continued toeat for free. But once outside the restaurant, the men began to comparetheir savings.
"I only got a dollar out of the $20," declared the sixth man. He pointed tothe tenth man "but he got $9!"
"Yeah, that's right," exclaimed the fifth man. "I only saved a dollar too.It's unfair that he got nine times more than me!"
"That's true!!" shouted the seventh man. "Why should he get $9 back when Igot only $2? The wealthy get all the breaks!"
"Wait a minute," yelled the first four men in unison. "We didn't getanything 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 downand ate without him. But when it came time to pay the bill, they discoveredsomething important. They didn't have enough money between all of them foreven half of the bill!
And that, boys and girls, journalists and college professors, is how our taxsystem works. The people who pay the highest taxes get the most benefit froma tax reduction. Tax them too much, attack them for being wealthy, and theyjust may not show up at the table anymore. There are other places offshorewith nice restaurants and good business opportunities.
DEFEAT SOCIALISM - VOTE ACCORDINGLY
posted by Haukur at 10:14 f.h.
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