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How taxes work. by subbywan 2007-07-03 16:24:23
I didn't write this, and everyone I've found who has been credited with writing it, has denied writing it:
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This is a VERY simple way to understand the tax laws.

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, and 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 (in tax language a tax cut).

"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 $80.00.

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 who 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, a little late what was very important. They were FIFTY-TWO DOLLARS short of paying the bill! Imagine that!

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.
[ Reply ]
  But since the rich guy didn't show up... by Phoon2007-07-03 16:32:26
    No. They didn't *order* according to by subbywan2007-07-03 16:43:12
      They still shouldn't have been $52 short. by Arachnid2007-07-03 16:46:46
        Right. by Phoon2007-07-03 16:47:44
          Missed a sentence there. by Phoon2007-07-03 16:49:21
          I don't think so by Arachnid2007-07-03 16:49:29
            If the analogy is for the tax by voxwoman2007-07-03 17:00:54
        Not necessarily, for the analogy by subbywan2007-07-03 16:53:54
          If you reduce any country's population by 1/10 by Arachnid2007-07-03 16:57:43
            They haven't reduced the population by subbywan2007-07-03 17:01:04
              The population is the number of people eating at by Arachnid2007-07-03 17:04:25
                Yeah, but it doesn't. by subbywan2007-07-03 17:07:32
                  When did _your_ country lose 1/10 of its by Arachnid2007-07-03 17:10:57
                    But the country doesn't *have* to lose by subbywan2007-07-03 17:18:09
                      No... by Arachnid2007-07-03 17:19:58
                        Not necessarily. by subbywan2007-07-03 17:24:45
                          But they still depend on the state for a lot of by Arachnid2007-07-03 17:27:00
                            Yes, and no by subbywan2007-07-03 18:35:21
        Okay, $44 short, then. by esbita2007-07-03 17:46:58
  Which is fine if it's tax cuts for everyone... by Arachnid2007-07-03 16:45:56
    Not the ones I've seen ... by subbywan2007-07-03 16:51:23
      I've never seen that by Arachnid2007-07-03 16:56:07
        The biggest yes. Hence this analogy by subbywan2007-07-03 17:02:34
          No, I said the biggest _percentile_ cut. by Arachnid2007-07-03 17:03:39
            can think of 2 things for that: by subbywan2007-07-03 17:06:33
              Depends on your country. by Arachnid2007-07-03 17:08:06
                Yes, but we assume we're talking about the US :P by subbywan2007-07-03 17:17:08
                  Ha! by Arachnid2007-07-03 17:19:07
                    Yes, but the accountant is often only fhe by subbywan2007-07-03 17:21:54
                      You can still hire people to do that for you by Arachnid2007-07-03 17:25:46
                        "cost-effective" includes opportunity cost. by esbita2007-07-03 18:08:34
                          As long as those tax writeoffs are still there by Arachnid2007-07-03 19:03:56
                            Yes it would... by esbita2007-07-03 19:34:48
                              None of that applies. by Arachnid2007-07-03 20:05:14
                                We're not arguing effectiveness by subbywan2007-07-03 20:07:08
  The dichotomy I would like to see resolved WRT tax by romandas2007-07-03 17:30:32
    How are you 'punishing' the wealthy? by Arachnid2007-07-03 17:33:56
      That's presuming flat taxation. by krikkert2007-07-03 17:36:13
        Not at all by Arachnid2007-07-03 17:39:32
          That's awfully presumptuous. by esbita2007-07-03 18:13:09
            The cutoff may be subjective by Arachnid2007-07-03 19:04:47
              Because it's going to vary according to situation. by esbita2007-07-03 19:37:30
                So how does tax fit in with your worldview at all? by Arachnid2007-07-03 20:02:57
                  Read my other responses in this thread. by esbita2007-07-03 20:54:12
                    We seem to be at broad agreement, actually. by Arachnid2007-07-03 20:58:34
                      I just don't agree with the arguments... by esbita2007-07-03 21:04:14
      Taxing someone higher than someone else by romandas2007-07-03 17:43:14
        Not doing that is punishing the poor by Arachnid2007-07-03 17:55:37
          No, it's being fair. by romandas2007-07-03 18:04:58
            Unless the tax rate is 100% by Arachnid2007-07-03 18:08:51
              They don't, here. by esbita2007-07-03 18:15:43
                They don't what? (n/t) by Arachnid2007-07-03 19:05:26
                  They don't pay any income tax. by esbita2007-07-03 20:48:57
                Yep... by tepidpond2007-07-03 20:22:23
              Actually, the entire monetary system.. by romandas2007-07-03 18:21:41
                Without a government, you don't have a single by Arachnid2007-07-03 19:08:02
                  How is a flat tax *rate* serfdom? by esbita2007-07-03 19:44:06
                    He was also saying that deducting more from those by Arachnid2007-07-03 20:02:18
                      It's simple common sense. by esbita2007-07-03 20:45:40
                        You're not looking at it system-wide. by Arachnid2007-07-03 20:49:34
                          How many of those people... by esbita2007-07-03 20:58:47
                            That's getting perilously close to the 'trickle by Arachnid2007-07-03 21:14:41
                              No argument the trickle-down effect isn't by subbywan2007-07-03 21:18:16
                              Because you've been arguing... by esbita2007-07-03 21:29:18
                                I think our conflict here... by esbita2007-07-03 21:30:19
        Flat tax punishes the poor. by Phoon2007-07-03 17:59:10
          Right, but I don't believe our current system by romandas2007-07-03 18:06:34
          So raise the standard deduction amount. by esbita2007-07-03 18:21:39
            The last part of your statment is what I was by techi8702007-07-03 18:49:21
              All that says is that many people are self-serving by Arachnid2007-07-03 19:09:05
                Welcome to reality and human nature. by esbita2007-07-03 19:54:19
                  And how would we do that? by Arachnid2007-07-03 20:00:56
                    but then you've just proven the point ... by subbywan2007-07-03 20:02:42
                      And what point is that? by Arachnid2007-07-03 20:06:57
                        but people ARE self-serving. by subbywan2007-07-03 20:08:26
                          So? by Arachnid2007-07-03 20:26:48
                            Nope, it's a fool's game and accomplishes nothing. by esbita2007-07-03 20:49:40
                              That's what I meant. (n/t) by Arachnid2007-07-03 20:56:56
                            That's what the TLP is doing: by subbywan2007-07-03 21:02:37
                              Except that what started the whole argument... by Arachnid2007-07-03 21:13:07
                                Ahem. by esbita2007-07-03 21:20:18
                                It's a *simple* analogy by subbywan2007-07-03 21:20:23
                                Just because it's simple doesn't mean it has to be by Arachnid2007-07-03 21:28:21
                                so you're complaining about poor math skills? by subbywan2007-07-03 21:37:42
                                When it invalidates the analogy, yes. (n/t) by Arachnid2007-07-03 21:50:59
                                agreed. But in this case, it doesn't. (n/t) by subbywan2007-07-03 22:47:15
                    Low tax, flate rate, no loopholes. by esbita2007-07-03 20:18:00
    what i would like to see by robertltux2007-07-03 19:21:23

 

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