Tax Cuts Explained
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.
There are lots of good restaurants in Europe and the Caribbean.
Let's put tax cuts in terms everyone can understand.
I located the rest of the story:
This is the only meal in town. You can go to another town, but in most towns the restaurant is much more expensive. A few towns are cheaper, but they have lousy food and you might get food poisoning.
The first 4 men have to walk two hours each way to get to lunch and back. The 5th takes the bus, it is 90 minutes. #6 and 7 take the subway, just 60 minutes. 7 and 8 drive, only 40 minutes, but have to feed the meter. #9 gets a free parking space out front, and his commute is only 30 minutes. The restaurant manager sends a limo for #10 at the restaurant's expense, with a cell phone so he can sit in the back and continue making money during his 15 minute ride.
The first 4 men can only order soup and bread. #5 and 6 can order an appetizer also. #7 also gets a salad. #8 also has a main course. #9 can have coffee with his meal. #10 has all that plus dessert and champagne.
The actual cost of the meal and limo is still $100. The manager borrowed the other $20 on the theory that the diners would come back and spend more, so he could hire more waiters who would also spend their paychecks at the restaurant. He knew that if he was wrong he would be long gone before the note came due and could leave it to some future manager to figure out how to repay the loan.
The "owner" was really just a hired manager. He just thought he was the owner because God told him so. The 10 diners actually owned the restaurant, in equal shares. Once every 4 years the partners came together to hire a new manager. However, #1 and 2 could not take the time out from their second jobs. #s 3, 4 and 5 didn't think their opinion would affect the decision so they didn't show up. 3 of the remaining 5 voted for the other guy, but one was a confused old man and the manager's brother was able to switch his vote.
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