I hope you people aren’t too offended by the following. I’ve already been called names by one person.
Not exactly my idea of fun.
-Grim
Let’s put tax cuts in terms everyone can understand.
Suppose that every day, 10 men go out for beer and the bill for all 10 comes to $100. If they paid their bill the way we pay our taxes, using the “progressive” tax formula, the billing would go like this:
The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.
So, the majority of the drinkers voted democratically to do that.
The 10 men drank in the bar every day and seemed quite happy
with the arrangement, until one day the bar owner surprised them.
“Since you are all good customers,” he said, “I’m going to reduce
the cost of your daily beer by $20. Drinks for 10 now cost just $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 drink for free.
But what about the other six men, the paying customers? How could they divide the $20 windfall so everyone would get his “fair share”?
They realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s bill, then the fifth man and the sixth man would each end up being paid to drink beer. That didn’t seem fair.
So, the bar owner suggested reducing each man’s bill using the
US tax formula. Then he presented the amounts each should pay.
The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (savings 33%).
The seventh now pay $5 instead of $7 (savings 28%).
The eighth now paid $9 instead of $12 (savings 25%).
The ninth now paid $14 instead of $18 (savings 22%).
The tenth now paid $49 instead of $59 (savings only 16%).
Each of the six was better off than before and the first four
continued to drink for free. But outside the bar, the drunks
compared their savings without any sense of thanks.
“I only got a dollar out of the $20,” declared the sixth man.
He pointed enviously to the tenth man, “but richie got $10!”
“That’s right,” exclaimed the fifth man. “I only got a dollar back.
It’s unfair that the richest guy got ten times more than I got!”
“Yeah!” 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 did not
get anything at all. The US system exploits the poor!”
Then the nine men surrounded the tenth and beat him up.
The next night the tenth man didn’t show up for drinks, so the nine had beers without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money from 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 anymore.
In fact, they might start drinking overseas where the atmosphere
is friendlier.
Tax cuts and rebates explained using drinks
Well, first of all, tax cuts don’t work by cutting a set amount from everyone’s taxes, but by cutting a percentage, so that NOT how it works;
Second, the actual data shows that raising taxes on the wealthy:
1) Increases the stock market growth rate;
2) Increases the economic growth rate; and
3) Raises inflation BUT also increases wages so much as to result in a higher net wage.
This has been shown to be true for top tax rates up to 91% – as it was in the 50s and early 60s – far higher than those of today).
Note that the top tax rate started out as 5%, so if any of the wealthy DID “opt out” of the system due to the raising of taxes, then they were simply replaced.
Zeke
Comment by Zeke — March 10, 2008 @ 7:04 pm
Come on, Grim, you know as well as I do that NOBODY who works and buys things (or owns property) pays zero taxes, no matter how low their income. Your drinks example is credible only if Federal income taxes alone are considered.
The tax structure we had in 2001, before we very recklessly cut taxes on the richest Americans, was working pretty well. We had just come off one of the strongest, most prolonged expansions in U.S. history. The mild recession we had in 2001 was like the sniffles compared to the financial pneumonia that is descending on us now.
The rich will not be hurt by a restoration of the tax levels we had in 2001. Far from it. Their wealth has increased enormously in the last seven years, and they control an amount of the nation’s wealth greater in proportion to the rest of us than any time since the 1920s or even the Gilded Age of the 1890s. I know conservatives often don’t don’t like to hear this, but taxes will HAVE to be raised at some point to avoid total federal meltdown. We’re just too much in the hole, my man. It can’t be any other way. We’re not going to grow ourselves out of 10 trillion in debt.
Comment by Joseph52 — March 11, 2008 @ 3:42 am
Zeke, where are you getting your figures? I don’t believe it.
Joe, thanks for the reply. I have another suggestion – reduce spending. It’s fact that the woman used to be able to stay home and maintain a family.
Not so today. Now the husband earns money to pay bills and the wife works to pay the taxes. Further, they have to fight for constantly increasing wages just to stay even, because of inflation.
I say we need to take down the richest one among us, the one who is also the largest employer: the federal government.
We need less government. Period.
It has proved itself again and again to be the most corrupt and wasteful way to attempt anything, from Katrina dikes to veteran medical care.
Among others, the govt needs to get out of welfare, agriculture, and education. Their track record in these and many other areas of responsibility is unspeakable.
Grim
Comment by grimgold — March 11, 2008 @ 10:08 am