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View Full Version : tax lesson for those who dont understand

Fasteddy7
08-14-2004, 10:34 AM
I've never seen such an easy-to-understand economic lesson! It's a shame
this can't be made mandatory reading for the lower income folks! 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 \$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. "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 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. There are lots of good restaurants in Europe
and the Caribbean.

David R. Kamerschen, Ph.D
Distinguished Professor of Economics
536 Brooks Hall
University of Georgia
Athens, Georgia 30602-6254

Wally_in_Cincy
08-14-2004, 11:01 AM
Fasteddy7,

thanks.

Cueless Joey
08-14-2004, 01:11 PM
Thanks Eddy.
I hope Mr. Pink tipped the waitress this time.
That makes more sense to me.

Fasteddy7
08-14-2004, 05:01 PM
I think i scared some people but stating "for those who dont understand" lol Tried to edit but time had exired.
haha

highsea
08-15-2004, 10:25 AM
<blockquote><font class="small">Quote Fasteddy7:</font><hr> I think i scared some people but stating "for those who dont understand" lol Tried to edit but time had exired.
haha <hr /></blockquote>No need to edit. Good post.

-CM