Tax cuts in simple language

Jerrek

Registered Senior Member
Suppose that every day, 10 men went out for dinner. The bill for all 10 came to $100. They decided to pay their bill the way we pay our taxes, so they divided the bill like this:

The first four men - the poorest - would pay nothing. The fifth would pay $1, the sixth $3, the seventh $7, the eighth $12, the ninth $18, and the 10th man - the wealthiest - would pay $59.

One day the restaurant owner threw them a curve (in tax language, a tax cut).

"Since we've been overcharging and spending money frivolously I've decided to cut our spending and to pass on the savings to you.'' he said, "I'm going to reduce the cost of your daily meal by $20.''

The group still wanted to pay the 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 would 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 at the restaurant owner's suggestion, they arrived at this new distribution: The fifth man paid nothing, the sixth pitched in $2, the seventh paid $5, the eighth paid $9, the ninth paid $12, leaving the 10th man with a bill of $52 instead of his earlier $59. Each of the six was better off, 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, then, pointing to the 10th. "But he got $7!'' "Yeah, that's right,'' exclaimed the fifth man. "I only saved a dollar too. It's unfair that 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 lesson here is one that congressional opponents of President Bush's efforts to reduce income taxes well understand. But for political reasons they have chosen to engage in class warfare, deliberately misleading their constituents with speeches decrying administration tax policies that "favor the rich.''


This is adapted from a column by Edwin Roberts in the Tampa Tribune.
 
There is a glaring problem with this analysis. Before the tax cut the wealthiest man paid ($59 / $100) = 59%. After the tax cut he paid ($52 / $80) = 65%. But the Bush tax cuts significantly dropped the percentage that the wealthiest pay, to the detriment of the rest of the taxpayers. A more realistic analogy would have the wealthiest man’s share of the bill cut to 50%, which is ($80 * 50%) = $40.

The tax cuts make everyone better off in the short term, until the middle class has to pay off the debt the tax cuts caused at a greater disadvantage than the wealthy because the middle class didn't get to bank as much money percentage-wise in the short term. Hence the tax cuts indeed favor the rich and Edwin Roberts is a Republican stooge.
 
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