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> > Today's Economic Lesson in Taxation
>
> > Let's put tax cuts in terms everyone can understand.
>
> > Suppose that everyday, 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.
>
> > 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."
>
> > 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 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 paid $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 $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 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 at the table anymore.
>
> > There are lots of good restaurants in Europe and the Caribbean.
>
> >
>
> > Courtesy of :
>
> > David R. Kamerschen, Ph.D.
>
> > Distinguished Professor of Economics
>
> > 536 Brooks Hall
>
> > University of Georgia
>
> > Let's put tax cuts in terms everyone can understand.
>
> > Suppose that everyday, 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.
>
> > 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."
>
> > 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 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 paid $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 $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 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 at the table anymore.
>
> > There are lots of good restaurants in Europe and the Caribbean.
>
> >
>
> > Courtesy of :
>
> > David R. Kamerschen, Ph.D.
>
> > Distinguished Professor of Economics
>
> > 536 Brooks Hall
>
> > University of Georgia
