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 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 beer by $20. 'Drinks for the ten 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. They would still drink for free. But what about the other six men - the paying customers?
How could they divide the $20 windfall so that everyone would get his 'fair share?' They 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 drink his beer. So, the bar 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 pay $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).
Each of the six 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. He pointed to the tenth man,' 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 I! ''That's true!!' shouted the seventh man. 'Why should he get $10 back when I got only two?
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 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 anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.
David R. Kamerschen, Ph.D.Professor of Economics University of Georgia
For those who understand, no explanation is needed. For those who do not understand, no explanation is possible.
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6 comments:
OK.....
But let's say, for argument’s sake, the tax plan is being distorted, and by "Spread the Wealth", they are really talking about taxing the Exxons and Credit Card companies of the world who are price gouging Americans because the Government has done away with regulation and GREED has taken over. With that being said, wouldn't it seem more "JUST" if not more "FAIR" to charge those companies at a higher tax rate.
You know, there was a time when we had people loaning money to people and charging them excessive interest where they never caught up. The government arrested those people for extortion and racketeering. Today, they call them credit card companies and charging 30% interest is an accepted practice. Now you will tell me they are just being successful business men and shouldn't even be taxed a little more than that family of 5 with income way less than $250,000 who the parents are both working two jobs each trying to stay a float, pay a mortgage, feed their family and possibly educate their children.
It is way past time for our government to step in and put “regulation” back in place to control these greedy companies. Sure a company deserves the right to be successful! But when a CEO can join a firm for 2 weeks and make over $20 million, it’s out of control. The same company wants the government to bail them out because they failed to thrive running their company, BUT don’t regulate us, don’t tax us, don’t tell us how to do our job, just give us your taxpayers dollars so we can get back to raping them or how they call it business as usual.
The way I see it, charge these companies more tax and regulate them, or charge them with extortion! Either one would be right Morally and Ethically!
Cute story, but it fails to recognize that the rich benefit most from the operation of the government.
In this (small universe) case, the rich man would likely be the owner of the bar, running with a high profit margin. Now redo the analysis with that assumption. Who is getting screwed now?
Getting back to the real world: The Gini index is a simple measure of income inequality. If it's too low, you've got complete socialism, if it's too high, then you've got France just before the French Revolution.
When Bush came into power he instituted "reforms" that would increase the Gini index (i.e. rich get richer). There were a number of such reforms. The generous tax cut for the wealthy was perhaps the most prominent.
And lo and behold, the USA's Gini index has increased pretty much throughout the time Bush has been on office.
A new candidate comes in and essentially says "Hey! What Bush has done isn't fair. We need a minor correction. We need to level the playing field"
Then all the joe-the-plumber types call him a "socialist" while, they're still being robbed by the current president's friends. That's just dumb.
That's right anonymous 12:29, tax the bar owner to the point he can't run a business and there will be nowhere to drink beer. This is where free market comes in, the men drinking the beer can go where ever beer price and service is best.
As for credit card companies charging 30% interest, its called fine print. People paying 30% knew it was a possibility, if you don't agree with it, don't live beyond your means and charge your lifestyle on credit. But I guess some people can't live without a new car, cable TV, manicures. How is that the government's fault? It is called personal responsibility!
Anon 1:29 still lives in a Fairy Tale World. Yes, it is in the fine print on the bottom. But when John Doe got his card, the max was more like 13%. Then as time went on the number rose, and yes the people should have canceled. But they have to pay it off first, paying the excessive tax until then.
By your theory, Monopolies should be allowed, there never should have been any laws against Racketeering, and everything would be running so smooth with pricing controlled only by greed. You obviously find no fault with $4 a gallon gas, $5 a gallon milk, etc. It's funny that Anon 1:29 uses the term moron. Because only a MORON would believe a society could survive that way! Heck, even a 8 year old knows a Monopoly kills Society. If not, even the "Parker Brothers game Monopoly" would go on forever and never end!
We had regulation for years and things ran pretty good. We dropped it and look where it's taken us. Wall Street just hit the end of their game playing without regulation. Now the "Taxpayers" are giving them more money so the game won't end.
Wake up! We're in a tail spin heading for the ground fast!
What monopolies do you speak of?
The only one making sense here is 1:29.
How is it that the rates credit card companies charge is news? In fact, they have gone down...it is when you pay later, or not at all that they jack you. And, if you didn't go spend what you didn't have you wouldn't be jacked! Why is it so beyond everyone to be accountable and take responsibility for their own mess and actions. I guess we should all just sit back and wait to be bailed out! What crap!
Do you not realize that the more you expect the government to afford you, the less you will have!
People wanted the 'right' to own a home and the government encouraged it, look what that brought us. Keep them away! Get off your rearend and pitch in and then just maybe you should have the right to bitch!
We reap what we sow, be careful what you wish for - you may not always see all possible outcomes until it is too late...
Extrapolate from the mindless movie about 7 wishes - Bedazzled, a 2000 remake of the 67 film written by Peter Cook. He asks to be a powerful sexy man....the devil turns him into a Drug lord in Mexico. In other words, his descriptions, and the acutal outcome via the mind of the devil vary immensely.
We have all been taken for granted and abused by our own country and its freeloaders. But for god sake, please stop pointing the finger to some one person to blame and and act like it is only the fault of a few. We have our own part in this mess by being uneducated sheep for one moment and sticking our heads in the sand at another. Rise up and do something about your situation and stop placing blame. We all need to take a long hard look in the mirror.
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