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Author
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Topic: Tax Cut
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Bob Maar
(Maar stands for Maartini)
Posts: 28608
From: New York City & Newport, RI
Registered: Feb 2001
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posted 02-12-2003 01:30 PM
This isn't funny!
Tax Cuts?
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, but he, pointing 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. Where would that leave the rest?
Unfortunately, most taxing authorities anywhere cannot seem to grasp this rather straight forward logic!
T. Davies Professor of Accounting & Chair,
Division of Accounting and Business Law
The University of South Dakota School of Business
414 E. Clark Street
Vermillion, SD 57069
[ 02-12-2003, 03:44 PM: Message edited by: Bob Maar ]
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Dustin Mitchell
Phenomenal Film Handler
Posts: 1865
From: Mondovi, WI, USA
Registered: Mar 2000
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posted 02-12-2003 03:26 PM
Perhaps that should be amended. The first four men don't pay might not pay for the meal (income taxes) but they have to chip in on the cab ride to the restaurant (SSI). Because the 12 men decided to split their cab fares by a different method than the meal the four poorest end up paying more (combined) in cab fare than the twelth man.
Its not all black and white.
Under the Bush plan a person with an income of $200,000 would see their tax fall from $79,200 to $66,000. Oh sure, they save $13,200, but is this really going to help our economy? Does it really make a difference if they have $120,800 in disposable income or $134,000?
I guess I can see how that is so important to our economy, as opposed to helping Joe Blow keep his house despite rising property values and crippling property taxes. Hey, maybe we better increase the gas tax or sales tax. That will certainly get people to spend more money (what is needed to get our economy going again) because naturally raising the price of goods through additional taxes is going to make people buy more of those goods.
Now don't get me wrong, I'm not a fan of raising taxes. I also really like parts of the Bush plan, like abolishing the mairage penalty and upping the child tax-credit to $1,000. I just don't understand why we need to lower income taxes even more than they have been in the last 20 years. Before Reagan's tax cuts the highest level of income tax was 50%. It is now 39.6%. That seems pretty fair to me. Not only that, but the unearned income (interest, dividends) rate has dropped from 70% to around 30%, and the capital gains tax from 35% to 20%.
But now is the wrong time to be cutting taxes even more. How about some assistance to the states, every one of them has a massive budget defict that will likely be made up for by deep cuts in services. Why not encourage economic growth by providing money for more low-interest small business loans? But the number one thing Bush could do to help the economy? Get the war with Iraq over and done with. Agree with war or not, the uncertainty it is causing is what is hurting our economy the most. Get that taken care of and things will look a lot better.
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