Tax Cuts 101

[hismajesty]

Sometimes politicians, journalists and others exclaim; "It's just a tax cut for the rich!" and it is just accepted to be fact.

But what does that really mean?

Just in case you are not completely clear on this issue, I hope the following will help. Please read it carefully.

Let's put tax cuts in terms everyone can understand.
Suppose that every day, ten men go out for dinner 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 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." Dinner 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 eat 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 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 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 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 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 me!"

"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 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 anymore. In fact, they might start eating overseas where the atmosphere is somewhat friendlier.

David R. Kamerschen, Ph.D
Professor of Economics
University of Georgia
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[Arta]

I think that example isn't very good.

What about tax cuts that predominately affect the wealthy but not the poor? I'm sure I've heard about cuts in things like inheritence tax and capital gains tax, which provide savings for the wealthy without doing anything to alleviate the tax burden of the poor.

[Stealth]

I think that example isn't very good.

What about tax cuts that predominately affect the wealthy but not the poor? I'm sure I've heard about cuts in things like inheritence tax and capital gains tax, which provide savings for the wealthy without doing anything to alleviate the tax burden of the poor.

I'm fairly certain that the professor is referring to general broad-scope income tax cuts like those performed by the Bush administration and consequently whined about by his opposition. The death tax and the capitol gains tax are a separate issue.

[Arta]

Ok, the example works on that level, I suppose, but anyone who doesn't understand that 33% of a small number is likely to be smaller than 16% of a huge number is simply uneducated. That's not why tax cuts are bad. Tax cuts are bad because your deficit is huge. Also, because Bush likes to cut things like capital gains and inheritance tax, I'm not surprised that the impression is given that he is predominately interested in reducing that tax burden for his rich friends...

[Grok]

Tax cuts are a distraction to make you fight amongst yourselves over how much of your own money they're going to 'allow' you to have back.  It keeps you from having any focus on how much they're getting you to volunteer in the first place.

[MyndFyre]

Tax cuts are a distraction to make you fight amongst yourselves over how much of your own money they're going to 'allow' you to have back.  It keeps you from having any focus on how much they're getting you to volunteer in the first place.

I don't particularly mind a small portion of my income taxed.  But when we're building the Bridge to Nowhere, I start to mind.

[VictoryInJesus]

a wise permanently crippled adolecent once wrote this poem: If you have enough breath to complain about something, than you have more than enough breath to be grateful for anything.   

I have seen so many people "diss" the U.S.'s current government/ governmental system, and I ask," If America is so flawed, why don't you go live somewhere else, like Russia, China, or Mexico, ect."

Be gratefull that God has given you this country to live in, and that millions have died to give you the "right to complain"

You don't hear people in China "dissing" thier government.....

[topaz]

a wise permanently crippled adolecent once wrote this poem: If you have enough breath to complain about something, than you have more than enough breath to be grateful for anything.

What does being crippled or adolescent have to do with ANYTHING? Trying to garner sympathy doesn't help you.

I have seen so many people "diss" the U.S.'s current government/ governmental system, and I ask," If America is so flawed, why don't you go live somewhere else, like Russia, China, or Mexico, ect."

Be gratefull that God has given you this country to live in, and that millions have died to give you the "right to complain"

I really hate it when "people" suddenly start randomly putting "quotes" around things that really have no "relevance".

You don't hear people in China "dissing" thier government.....

That's because China continues to hold a powerful grip on communications. That doesn't mean it doesn't happen - you're really dense.

[VictoryInJesus]

...............

a wise permanently crippled adolecent once wrote this poem: If you have enough breath to complain about something, than you have more than enough breath to be grateful for anything.

What does being crippled or adolescent have to do with ANYTHING? Trying to garner sympathy doesn't help you.

I was describing who wrote the poem, I was not trying to garner sympathy from anyone on his behalf.

I have seen so many people "diss" the U.S.'s current government/ governmental system, and I ask," If America is so flawed, why don't you go live somewhere else, like Russia, China, or Mexico, ect."

Be gratefull that God has given you this country to live in, and that millions have died to give you the "right to complain"

I really hate it when "people" suddenly start randomly putting "quotes" around things that really have no "relevance".

On "diss" i wass using quotations to show that it was slang (I usually uphold myself to use proper English where possible), on " If America is so flawed, why don't you go live somewhere else, like Russia, China, or Mexico, ect." I was using quotations to show that I actually said this before, and to show I was quoting myself....and for "right to complain" I was using quotations to show emphasis to try to grab the reader's attention. I wanted to make them think about why they are complaining about the govt. and to possibly change thier approach on politics, because of the sacrifices people have made to give them free speech. I apologize for using over using quotations in this particuar post, but sometimes I find it important to stress certain things so people understand my point better.

You don't hear people in China "dissing" thier government.....

That's because China continues to hold a powerful grip on communications. That doesn't mean it doesn't happen - you're really dense.

I understand that China isn't as Democratic as America, and that is why I said this, to make people think about how we Americans have the freedom to critize our own government, but this is not a worldwide freedom. That is why you should apreciate being American, it is what makes us the greatest country on Earth.

I'm sorry I had to explain all this for you, I was trying to make my point come across clear, but more powerfully than just shouting it or blatantly saying it.

- you're really dense.

Why thank you! I pride myself in being "dense" 

[topaz]

I was describing who wrote the poem, I was not trying to garner sympathy from anyone on his behalf.

Describing the person is irrelevant. What's the point of doing it, besides for sympathy?

On "diss" i wass using quotations to show that it was slang (I usually uphold myself to use proper English where possible), on " If America is so flawed, why don't you go live somewhere else, like Russia, China, or Mexico, ect." I was using quotations to show that I actually said this before, and to show I was quoting myself....and for "right to complain" I was using quotations to show emphasis to try to grab the reader's attention. I wanted to make them think about why they are complaining about the govt. and to possibly change thier approach on politics, because of the sacrifices people have made to give them free speech. I apologize for using over using quotations in this particuar post, but sometimes I find it important to stress certain things so people understand my point better.

It seems really amateurish to do that, except on the rare occasion. You can definitely think up better ways to stress your point.

I understand that China isn't as Democratic as America, and that is why I said this, to make people think about how we Americans have the freedom to critize our own government, but this is not a worldwide freedom. That is why you should apreciate being American, it is what makes us the greatest country on Earth.

I'm sorry I had to explain all this for you, I was trying to make my point come across clear, but more powerfully than just shouting it or blatantly saying it.

Nothing good comes of whining; real change only comes about through action.

[Rule]

I understand that China isn't as Democratic as America, and that is why I said this, to make people think about how we Americans have the freedom to critize our own government, but this is not a worldwide freedom. That is why you should apreciate being American, it is what makes us the greatest country on Earth.

Who says that people with constructive criticism aren't grateful to be alive?  What's your point?  We should be grateful for having freedom of speech, and if we choose to use it we are ungrateful?  lol.  Just because something is OK doesn't mean we shouldn't speak our minds to make it better.  After all, that is one of the purposes of this "freedom." You seem to really be contradicting yourself...

[VictoryInJesus]

Who says that people with constructive criticism aren't grateful to be alive?  What's your point?  We should be grateful for having freedom of speech, and if we choose to use it we are ungrateful?

Very rarely have I seen constructive criticism used, but you are right about that. Most people doing the arguing on politics are not smart enough to see how some of thier plans would play out. What I am saying is that America at a whole should return to its patriotic roots instead of complaining about every little thing, unless it truly does ned to be changed.

As for Topaz,

Nothing good comes of whining; real change only comes about through action.

This is what I have said twice now... are you agreeing with me? 

[topaz]

Then what's the point of criticizing your government and doing nothing else? That's what most complainers in the US are like.

[MyndFyre]

I don't really understand, or I tend to agree with Rule (if I do understand I agree with Rule): there's absolutely no relevance as to whether I can be thankful for living where I do.  I am.  But I have a choice: I can be thankful for living at 60% of the best I can live at, or I can expend energy and live at more than 60% of the best I can live at.  And, incidentally, maybe by expending that energy, I can help others live better, too.

Spouting off random quotes is really nonsense.

[VictoryInJesus]

Sigh....