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BlueEyz2006
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Posted on Wed, Sep 24, 2008 17:47

There's been a lot of talk lately about tax cuts for the middle class versus tax breaks for the rich. Here is a story I found to be quite illustrative. Suppose that every day, ten men go out for beer 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 drank in the bar every day paying according to this schedule and all seemed quite happy with the arrangement, until one day, the owner threw them a curve ball. "Since you are all such good customers," he said, "I'm going to reduce the cost of your daily beer by $20." Drinks for all ten men 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 since they would continue to drink for free. The other six men - the paying customers, were faced with a dilemma. How could they divide the $20 windfall to give everyone his "fair share"? They realized that $20 divided by six is $3.33, but if they subtracted that amount from everybody's bill the fifth man and the sixth man would each be paid to drink his beer. So, the bar owner suggested it would be more fair to reduce each man's bill by roughly the same amount according to what they were already paying and he proceeded to work out the amounts each should pay as follows: 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 ? the most dollars off but the smallest comparative savings). Under the new arrangement, each of the six paying customers was better off than before and the first four continued to drink 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 pointing to the tenth man, "but he got $10!" "Yeah, that's right," exclaimed the fifth man who was now drinking for free, "I only saved a dollar, too. It's unfair that he got ten times more than I!" "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 drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important, they only had enough money between all of them to pay half of the bill! And that is how our tax system works. The people who pay the highest amounts in taxes technically get the most benefit from a tax reduction on a dollar basis but not on a percentage basis. Tax them too much, attack them for being wealthy, and they may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.


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Cotton1122
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Posted on Tue, Oct 07, 2008 09:24

You have my vote!


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BlueEyz2006
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Posted on Sun, Sep 28, 2008 12:57

Dear Simone, No, this is illustrative of general tax prinicipals only, it is not advocating taxing the poor more than the rich. This simply shows that when a tax cut is declared, it does make sense for those paying the most to receive more in the way of actual dollars cut which is still a smaller percentage break. The truth is that taxes should be reduced for everyone and government spending should be curtailed as much as possible. The $700B bailout for private industry is absolutely ridiculous!


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MissMonteCarlo
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Posted on Sun, Sep 28, 2008 07:49

Dubai or monaco anyone? sarah :-)


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shazbot82
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Posted on Sat, Sep 27, 2008 01:20

could be much much worse. Taxes in Australia and the UK take 45 to 67 %. My good pal left Au for India because his taxes were astromonical.


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Posted on Sat, Sep 27, 2008 00:24

Well I think the thinking for taxes is the fact the the richest are like the poorest, paying little or no taxes, and the middle income are paying the largest portion in percent amounts.


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The_Rose
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Posted on Thu, Sep 25, 2008 00:18

This illustration is far to simple for A tax system so complex.Reverse it and you could also be saying don't put all your eggs in one basket.My mother was A tax autitor- mostly corporate, sole properiters for the goverment. Talk about light reading:-) In any event if any " tax cut" is created ,a new "tax cut "is usually created to offset the previous "tax cut" ??. Usually before you could finish reading the new laws:-) Personally I would even make the poorest pay " the tip" so to speak.P.S did they round this off to the nearest dollar :-)


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shazbot82
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Posted on Wed, Sep 24, 2008 21:50

comendable John. I second that emotion.


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