Tax Cuts - A Simple Lesson In Economics

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.

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.

David R. Kamerschen, Ph.D.
Distinguished Professor of Economics
536 Brooks Hall
University of Georgia

I have not seen that before, intersting analogy thanks for the post.

There's always more than one side to the table we sit at (save Arthur)and I think it's important for people to be diverse in thinking. Could there be a perfect world? and if so would we get board with it? I think it would be boring to have no change. So the tax structure will change, some will be happy and some will not. getting time to move on to another topic for me too.

But in reality taxes are the dues levied for living in the society - the rich pay more not only because they have more but because they use more - do fire departments really exist to put out slum fires or to suppress fires in office building and mansions?
Do we have a standing army to protect Section 8 housing or the vast international investments of the leisure class?
Are the SEC and Federal Reserve really necessary to administer Medicaid?
Whose physical possessions are the police department protecting - the 15 year old TVs in the public housing complexes?
Are we maintaining a vast highway system so bums will have some place to hitchhike?
Coastal development (marinas, ports, etc...) exists so fishermen with cane poles will have a nice backdrop to fish in front of (if they're allowed access to the beach at all)?
Public support of sports complexes is a form of generosity permitting that guy with the stolen grocery cart full of aluminum cans to afford a $200 sideline ticket on Sunday?

When you hear about rich people complaining about taxes it's because their selfish vision of the world is that not only do they deserve what they have eaned or inherited by divine right, but the world should be arranged so that they keep it all too - they feel no obligation to the larger society because the world around them exists only for their convienience and satisfaction.

The funniest part of it is that they're often the most pious self-professed xtians too - after all they're their god's chosen people - that's why they're rich, no?

Fire department exit to put out all fires. They were putting out fires in New Orleans weren't they? Pretty slummy area if you ask me?

The Police departments are protecting all property. Are there no police and fire departments in poor areas? If a poor person calls the police are you saying the don't come? They come just as often for the poor and middle class as they do the rich.

The rich are paying more for cars, boats, marinas and just about everything else they use. Are they not buying the cars, boats, docks to put their boats in, gas, etc. Or are you saying they get these things for free? If they get them for free then you may have a point. However they don't get them for free do they?

Your last statement is pure BS. The rich give more money to charity than you will ever earn. I think they would pay even more if they weren't taxed so high.

No they are not rich because they are Gods chosen people (Is this a crack at Jews?) Most are rich because they got off their ass and worked for a living. They took risks and they busted their ass to get what they have. For the few that inherited their money then someone else busted his ass so his children could have more.