pooltchr

01-27-2011, 08:10 AM

How can this possibly work?

Let's assume that everyone in the country was at a 20% tax rate, just for the simple mathmatics.

Economists tell us that a dollar introduced into a local economy will circulate through 7 different people before it leaves.

OK

One person has a dollar which he paid .20 in taxes on.

He spends it and now person 2 made a dollar and must pay .20 in taxes, so he really only has .80.

Person 2 spends his .80 with person 3 who must pay .16 in taxes.

Person 3 now has .64 to spend with person 4, who pays .13 in taxes.

Now person 4 has .51 cents to spend with person 5, who pays .10 in taxes.

Person 5 spends with person 6 who pays .08 in tax on his .40 income

Then he spends his .32 with person 7 who pays .06 in taxes.

At this point, the government has collected .93 in taxes on that single dollar, which should mean there is only .07 left in the economy. But person 7 still has .26 left.

Where did the other .19 come from?????????????????

And how did the government manage to collect .93 in taxes on a single dollar??????

Just something interesting to think about. At what point has the government taken more in taxes than the value of the original dollar? And how can they collect more than is actually there to begin with???

Steve

Let's assume that everyone in the country was at a 20% tax rate, just for the simple mathmatics.

Economists tell us that a dollar introduced into a local economy will circulate through 7 different people before it leaves.

OK

One person has a dollar which he paid .20 in taxes on.

He spends it and now person 2 made a dollar and must pay .20 in taxes, so he really only has .80.

Person 2 spends his .80 with person 3 who must pay .16 in taxes.

Person 3 now has .64 to spend with person 4, who pays .13 in taxes.

Now person 4 has .51 cents to spend with person 5, who pays .10 in taxes.

Person 5 spends with person 6 who pays .08 in tax on his .40 income

Then he spends his .32 with person 7 who pays .06 in taxes.

At this point, the government has collected .93 in taxes on that single dollar, which should mean there is only .07 left in the economy. But person 7 still has .26 left.

Where did the other .19 come from?????????????????

And how did the government manage to collect .93 in taxes on a single dollar??????

Just something interesting to think about. At what point has the government taken more in taxes than the value of the original dollar? And how can they collect more than is actually there to begin with???

Steve