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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,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, "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, a very important point. They were quite a bit short of paying the bill!

Imagine that!

And that, boys and girls, journalists and college instructors, is how the US 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.

[Edited by HVACneophyte on 01-13-2003 at 09:55 AM]

2. kim
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There is a little problem with your analagy. First the bottom 3 guys get paid to eat. The first 2 get steak and lobster. The next 2 just get steak. The 5th guy gets coffee and a grilled cheese sandwich. The 6th guy just gets coffee. The richest guy gets steak, lobster, champagne and caviour.
When guy #5 and 6 complain about getting nothing for their tax money, guy #9 and 10 call them socialist and tell them they will be better off with Republicans trickling down apon them. The 4 guys at the bottom tell guy #5 and 6 that the Democrats will just tax rich people and give guy #5 and 6 all their money back.

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How Taxes Work....
This is a VERY simple way to understand the tax laws. Read on - it does make you think!!
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 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
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Division of Accounting and Business Law
The University of South Dakota
414 E. Clark Street
Vermillion, SD 57069
Phone: 605-677-5230
Fax: 605-677-5427

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BP - thanks. i was wondering where that little story came from. someone e-mailed it to me and I figured it would be an interesting addition on this site.

Kim - this was not "my" analogy (see above)

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The government needs to be fair with all of its people, but what is the real reason for tax breaks? There is only one reason to run in a deficit: stimulate economy. (The real reason we run a deficit is: politicians are too afraid to cut spending to their constituants and to afraid to charge them for their services.) The biggest effect on the economy is: give the money to the people that would spend the "extra" money they get.
The feds say the last "stimulus" did not stimulate spending. They planned something wrong.

I just feel the average Joe American is left out in the whole political scheme. The average american's confidence in the economy is what drives spending. If you might get laid off, you tighten your belt. If enough people think the economy is going down, they slow their spending and the economy does go down.
Big business does not create jobs. They only make the products that people buy. If people don't buy, big business lays people off because they can't sell.

My economics prof told us that the economy generally does better under democratic control, because they give more money to the poor and stimulate spending.

Face facts: the government is out to help the government and politicians are out to help politicians. If you get helped in the process, you must have been in the right place at the right time. Seems like everytime my ship comes in, I am stuck in traffic or I went to the train station by mistake.

[Edited by kim on 02-12-2003 at 12:28 PM]

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GOD never asked for more than 10% from anyone and everyone!

If the US government can't make ends meet with 10% they are just greedy and can't manage OUR money.

Actualy, TAXES DON'T work, the people work.

7. kim
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That's a real stretch comparing politicians to God.

If everybody paid their fair share of taxes 10% might be enough.

The welfare system in the bible allowed people to follow the harvesters to pick up the grain left behind. Our system convinces people that they need a 52" TV. The governemnt will not buy one for them, but will pay for everything else. Then someone pays them cash money to save on employment taxes and the welfare people can buy their big TV and not turn in the income.
They had no SS back then either. Poeple did not live as long plus God made a commandment telling people to take care of their elderly parents.

The conquering peoples laid some heavy taxes though.

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Ib thought this was the JOKES SECTION ???

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BP that is an excellent explanation of our tax system, too bad that most Americans do not understand it.

I would add that the first five are the members in our society who say, "What can/should the Government do for me because we are lazy” (i.e. free dinner) and the top five say "what can we do to help everyone" because we control our life and have worked hard and want to share our success by paying taxes/handouts!

10. kim
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Dash, What about our tax system does not seem like a joke to you.

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That I have to pay !

12. kim
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Well that just means that the joke is on the 50% - 60% of us that have to pay our taxes. The other 40 -50% are laughing all the way to the bank.

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Originally posted by dash
Ib thought this was te JOKES SECTION ???
me too. I didn't think this would get so heavy. Guess I should have put it in the America, Religion and Politics thread.

I kinda thought it was just a hoot and didn't take it too seriously - until BoilingPoint actually indicated some academic big shot (to the extent that one can teach at the University of South Dakota and still be considered a big shot) actually came up with it.

note to all SD residents and alumni - please spare me the "hey I live and/or went to school in South Dakota and I am offended by that crack"

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