Taxes 101

[Brisco 0]

Subject: Taxes 101


Sometimes Politicians can exclaim; "It's just a tax cut for the rich!", and it is just accepted to be fact. But what does that really mean? Just in case you are not completely clear on this issue, we hope the following will help.

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

Brisco

Experience is what you get when you don't get what you want.

[JeffD 0]

Yes the ignorant litter society.

[snugfit 0]

Ha! I loved that! We've all gotten so used to paying taxes that the IRS has many of us believing that if they take less of our money it's like we're getting a gift!

So can anyone explain the $1,000 per child federal tax exemption? Since I don't have kids I pay higher taxes? Why is that?

Custom T-Shirts and Pullup cords

[kallend 1,623]

There is a fundamental flaw in that rant which makes it irrelevant.

The cost of the meal NEVER goes down.

Even under Ronald Reagan government spending increased.

Government spending is spinning out of control under GWB.

There is a second fundamental flaw which makes it plain wrong.

The poor and the rich do not get the same meal.

...

The only sure way to survive a canopy collision is not to have one.

[PhillyKev 0]

And on top of those flaws, the majority of tax breaks that GWB passed don't give ANYTHING to anyone except the 6th man.

[dove 0]

My dad sent this to me a few years ago. It still cracks me up.

Fall in dove.

[sammer 0]

That's good but I think for a really accurate comparison, the poor guys would have to make some money on the deal.

Also the rich and poor don't eat the same meal...the poor guys get dessert

[meltdown 0]

Huh?

[meltdown 0]

It doesn't matter that the cost doesn't go down, for purposes of this analogy. The fact is the cost COULD go down if our suck ass politicians on both sides of the aisle would stop giving away the store and start acting responsibly. And to your second "fundamental flaw" I say this: The poor don't have to remain poor. Poor people do make it to the middle and upper classes all the time in this country - if they have the will and ambition to do so. And NO taxpayer handout can give them that - it has to come from inside.

[bmcd308 0]

>>The cost of the meal NEVER goes down. <<

And what a shame that is. Maybe someday, someone will reform the restaurant so that prices are lower, but you have to order up front and pick your meal up there before you go to the table.

I would tolerate a lower level of service to reduce the overall cost of the meal. Unfortunately, some have grown so accustomed to getting an ever more costly meal that such reform may well be impossible with the restaurant's current customer base.

----------------------------------
www.jumpelvis.com

[PhillyKev 0]

Quote

Huh?

The tax cuts that apply to lower and middle class sunset and go away after 2004. Those for upper class do not.

Also, the top 1% pay 23% of the tax in this country. They are receiving 39% of the tax cut.

[PhillyKev 0]

Quote

I say this: The poor don't have to remain poor. Poor people do make it to the middle and upper classes all the time in this country - if they have the will and ambition to do so.

They also need the ability. What about stupid people or disabled people? They may have the will and ambition but not the resources.

[meltdown 0]

They wouldn't go away if they were made permanent. And for your second point, the top 1% are vastly overtaxed to begin with - I don't see a problem with them getting back more of their overcharge. If it was Halliburton or Enron paying back overcharges, you'd probably be all for it.

[meltdown 0]

I say this: The poor don't have to remain poor. Poor people do make it to the middle and upper classes all the time in this country - if they have the will and ambition to do so.
------------------------------------------------------------
They also need the ability. What about stupid people or disabled people? They may have the will and ambition but not the resources.
______________________________________
I don't have a problem helping the disabled. Stupid people? Depends on how "stupid" you're talking about, but the average person can make it in this society. And as for the resources I repeat - it has to come from inside. Every person has the ability to make a decision to better himself, and act on it. Whether they do that or not will determine in large part how their life plays out.

[PhillyKev 0]

Quote

They wouldn't go away if they were made permanent. And for your second point, the top 1% are vastly overtaxed to begin with - I don't see a problem with them getting back more of their overcharge.

You have a point. However they won't be permanent because of the massive debt that is accruing. And yes, tax burdens are not equitable across all incomes. However, I would argue that the higest income people also receive more governmental benefits.

[meltdown 0]

They wouldn't go away if they were made permanent. And for your second point, the top 1% are vastly overtaxed to begin with - I don't see a problem with them getting back more of their overcharge.

------------------------------------------------------------You have a point. However they won't be permanent because of the massive debt that is accruing. And yes, tax burdens are not equitable across all incomes. However, I would argue that the higest income people also receive more governmental benefits.
_____________________________
The massive debt is no doubt sickening. You are correct that the highest income people benefit the most, but I would call it "societal" benefits, not "governmental". They benefit from their contributions to the system, in the form of acquiring skills that result in high paying jobs, or starting a successful business, or whatever. Not from sucking from the system. That's what is so great (IMO) about the capitalist society we live in. For those with talent, skills, ambition and drive, the heights you can reach are limitless. And even regular guys like me can make a decent wage, live in a nice house, and have food to eat, once we stop complaining and start getting busy.

[Kennedy 0]

Quote

You have a point. However they won't be permanent because of the massive debt that is accruing. And yes, tax burdens are not equitable across all incomes. However, I would argue that the higest income people also receive more governmental benefits.

How to the highest brackets receive the most benefits? I would say the people who pay no taxes receive the most benefits, followed by people in the lowest income brackets.

witty subliminal message
Guard your honor, let your reputation fall where it will, and outlast the bastards.
1*

[PhillyKev 0]

Quote

How to the highest brackets receive the most benefits? I would say the people who pay no taxes receive the most benefits, followed by people in the lowest income brackets.

Defense = 20% of the budget. The rich have more to defend. It's like insurance, you have a bigger house, you pay more to protect it.

Social Security. The more you pay in, the more you get out.

National infrastrucure, again, the more you have the more you benefit. I don't know many people in N. Philly making use of the interstates or airports.

Public education - the rich benefit by having educated employees more so than the educated employees do.

FDIC and S&L bailouts

Government subsidies to airlines, nuclear power companies, timber companies, mining companies, automakers, drug companies, export companies, maritime shippers.

[kallend 1,623]

Quote

Quote

How to the highest brackets receive the most benefits? I would say the people who pay no taxes receive the most benefits, followed by people in the lowest income brackets.

Defense = 20% of the budget. The rich have more to defend. It's like insurance, you have a bigger house, you pay more to protect it.

Social Security. The more you pay in, the more you get out.

National infrastrucure, again, the more you have the more you benefit. I don't know many people in N. Philly making use of the interstates or airports.

Public education - the rich benefit by having educated employees more so than the educated employees do.

FDIC and S&L bailouts

Government subsidies to airlines, nuclear power companies, timber companies, mining companies, automakers, drug companies, export companies, maritime shippers.

Shhhh - you're not supposed to bring up welfare for the rich and well connected... Only the undeserving poor get welfare.

...

The only sure way to survive a canopy collision is not to have one.

[kallend 1,623]

Quote

It doesn't matter that the cost doesn't go down, for purposes of this analogy. The fact is the cost COULD go down if our suck ass politicians on both sides of the aisle would stop giving away the store and start acting responsibly. And to your second "fundamental flaw" I say this: The poor don't have to remain poor. Poor people do make it to the middle and upper classes all the time in this country - if they have the will and ambition to do so. And NO taxpayer handout can give them that - it has to come from inside.

I live in a prosperous suburb of Chicago and our property tax funded public schools are pretty good - lots of national merit scholars etc. etc.

9 miles away is Ford Heights, the community in the USA with the lowest per capita income. Their property tax funded public schools are terrible.

Just how exactly are those poor children supposed to improve themselves "from inside", when they start with k-12 years of disadvantage? Sure some do climb into the middle class, but they don't just have to be as good as the kids from the rich burbs, they have to be far better because they have way farther to climb.

...

The only sure way to survive a canopy collision is not to have one.

[gmanpilot 0]

Quote

Defense = 20% of the budget. The rich have more to defend. It's like insurance, you have a bigger house, you pay more to protect it.

The defense department could not give a shit about your house ot my house.

Quote

Social Security. The more you pay in, the more you get

If you are already rich you are not going to be getting much in the way of SS.

Quote

National infrastrucure, again, the more you have the more you benefit. I don't know many people in N. Philly making use of the interstates or airports.

Most of the folks on the interstates and in the airports are middle class schmucks like you and me, the top 1% own jets.

Quote

Public education - the rich benefit by having educated employees more so than the educated employees do.

The benefit if an education goes beyond it's earning potential. I don't buy the theory that the rich benefit the most from taxes. What would happen if there were no taxes at all? Who would receive the greatest harm? The poor, because their lives revolve around and completely depend upon a redistribution of wealth.

_________________________________________
-There's always free cheese in a mouse trap.

[Kennedy 0]

apparently my reply was never posted (WTF) but I'll give you the short version

Defense benefits us all. You're talking about how the rich benefit from their money, not from the government.

Rich people don't get shit out of SS. Also, it'll be bankrupt in 2020 or so. That's not going to be too bad of a thing for rich folks. How do you think not so rich folks will handle it?

Infrastructure benefits us all. You're again tlakingabout how the wealth of the rich allows the to use it differently. I don't see how the governemtnset it up to benefit them more.

All those subsidies were to companies. Obviously they were seen as important, or they wouldn't have been granted in the first place. If the subsidies helped the rich's stocks up, they also saved thousands of people's jobs and ability to function.

The rich benefit from being rich. The poor benefit from the government. When's the last time you saw a rich person cashing in food stamps sent free from Uncle Sam?

witty subliminal message
Guard your honor, let your reputation fall where it will, and outlast the bastards.
1*

[meltdown 0]

Just how exactly are those poor children supposed to improve themselves "from inside", when they start with k-12 years of disadvantage? Sure some do climb into the middle class, but they don't just have to be as good as the kids from the rich burbs, they have to be far better because they have way farther to climb.
_________________________________________________
Well, ya know, that's just the way it is. My mother was part of a poor sharecropper family and spent her childhood picking cotton to support her family. My dad grew up on the poor side of Providence and never had any privileges either. Guess what: they made it. Nobody ever said life was fair - you are dealt your hand and do the best you can. You can decide to improve yourself and reap the benefits that come with that, or you can sit around complaining about "the man", waiting for your welfare check, and wondering why your life sucks.
You're right, disadvantaged people have farther to climb, but you gotta start somewhere, and you'll never get there if you don't start. And you'll never start if you have a piss poor "the world owes me something" attitude.

[kallend 1,623]

Quote

Just how exactly are those poor children supposed to improve themselves "from inside", when they start with k-12 years of disadvantage? Sure some do climb into the middle class, but they don't just have to be as good as the kids from the rich burbs, they have to be far better because they have way farther to climb.
_________________________________________________
Well, ya know, that's just the way it is. My mother was part of a poor sharecropper family and spent her childhood picking cotton to support her family. My dad grew up on the poor side of Providence and never had any privileges either. Guess what: they made it. Nobody ever said life was fair - you are dealt your hand and do the best you can. You can decide to improve yourself and reap the benefits that come with that, or you can sit around complaining about "the man", waiting for your welfare check, and wondering why your life sucks.
You're right, disadvantaged people have farther to climb, but you gotta start somewhere, and you'll never get there if you don't start. And you'll never start if you have a piss poor "the world owes me something" attitude.

I believe that the nation (not the world) owes its poor kids a public education every bit as good as the rich kids public education. That is not the way it works right now. The poor kids K-12 public education is definitely inferior.

...

The only sure way to survive a canopy collision is not to have one.

[meltdown 0]

I believe that the nation (not the world) owes its poor kids a public education every bit as good as the rich kids public education. That is not the way it works right now. The poor kids K-12 public education is definitely inferior.
___________________________________________
No amount of government interference or funding can make a parent sit down and read with his kid, or get involved in his kid's school, or help with homework, or discipline a child appropriately, etc. Parental involvement (or lack thereof) in kids' lives is one of the biggest contributing factors to the quality of a school. The government can't mandate that - it's up to the individual parent. And programs that try to provide those things for the poor kids with shitty parents are nothing more than a band aid on the problem. As long as there are shitty parents, there will be shitty schools. Teachers cannot simultaneously teach basic skills and act as a surrogate parent.