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Understanding Tax Cuts in Simple Terms
Unknown | January 13, 2003 | Unknown

Posted on 01/13/2003 4:57:11 PM PST by From The Deer Stand

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.

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 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 paid nothing, the sixth pitched in $2, the seventh paid $5, the eighth paid $9, the ninth paid $12, leaving the tenth man with a bill of $52 instead of his earlier $59.

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 $7!"

"Yeah, that's right," exclaimed the fifth man. "I only saved a dollar, too. It's unfair that he got seven times more than me!"

"That's true!" shouted the seventh man.

"Why should he get $7 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 he 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 were $52 short!

And that, boys and girls, journalists and college instructors, is how the 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.

Unfortunately, Liberals cannot grasp this straight-forward logic!

TOPICS: Business/Economy
KEYWORDS: ohnonotagain; taxes

1 posted on 01/13/2003 4:57:11 PM PST by From The Deer Stand
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To: From The Deer Stand
Nicely stated.

And this, from an Economics student (at 35- I got tired of being a tech weenie!)...

Too bad liberals are too stupid to understand the Laffer Curve, and buyer-behavior, as you so aptly described... :-(

Be Well,

2 posted on 01/13/2003 5:00:11 PM PST by Capitalist Eric
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3 posted on 01/13/2003 5:07:23 PM PST by Anti-Bubba182
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To: From The Deer Stand

The trolls at DU were wrestling with this one today. Needless to say, they refused to address it directly.
4 posted on 01/13/2003 5:13:52 PM PST by expatpat
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To: From The Deer Stand
Excellent! I'll forward this to my liberal friends. I heard a comment on a Fox cable broadcast by some economist - many in that upper 1 percent group do have the means not to show up at the dinner table. Shifting assets overseas etc. I'm not an economist so I don't understand the details, but I know what happens when the bills don't get paid.
5 posted on 01/13/2003 5:15:27 PM PST by roadcat
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To: From The Deer Stand
6 posted on 01/13/2003 5:37:51 PM PST by Fraulein
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