Tax cuts and how they work

Rock Island Ranger · March 28th, 2006, 10:03 am

This is a good explanation of how income taxes
really work!!
Sometimes politicians, journalists and others exclaim; "It's just a
tax cutfor 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, I hope the
following will help. Please read it carefully.
Let's put tax cuts in terms everyone can
understand.
Suppose that every day, ten men go out for dinner and 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 would pay $7.
The eighth would pay $12.
The ninth would pay $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." Dinner for the ten 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 eat for free. But
what about the other six men - the paying customers? How could they divide the $20 windfall so that everyone would get his 'fair share?'
They 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
amountseach 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 two? 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 anymore. In fact, they might start eating overseas where the atmosphere is somewhat friendlier.

VAK · Post by **VAK** » March 28th, 2006, 10:55 am

Having dealt with this a thousand times, I agree...

Holy Fuck do I agree... I do however wonder if it wouldn't be wise, if during the course of the War on Terror, we shouldn't have kept the tax on the top 2% which would have kept us from deficit spending and certainly could if corrected pull us back out within three years.

I don't by any means think it should be a forever tax, nor do I believe that it should be a tax imposed in addition too, simply a re-instatement of an existing taxation policy to eliminate the deficits that are becoming staggering and will soon lead to overwhelming inflation.

But then, if we leveled the playing field on on import/export tariff's, (And trust me, I would be among the first to be royally fucked here), then we would be working to strengthening the American workforce once again and keeping our economy in it's place. I don't believe that it is anymore about National soverienty but about corporate greed. I have no problem with anyone's bottom line being whatever they'd like it to be just not at the cost of the Nation-I am willing to spend my corporate dollar to back that up....

Just a couple of passing thoughts.

msg_dman · Post by **msg_dman** » March 28th, 2006, 6:08 pm

That is the best breakdown I have seen. Great post.

deleon275 · Post by **deleon275** » March 29th, 2006, 8:36 am

Tax the wealthiest people so much they're in poverty level and then make taxes very low for the poor so then everyone goes up to the middle class where there are no taxes!

It will work, let me make a story about 10 guys finding a pile of shit and eating it and throw in some numbers.

Darksaga · Post by **Darksaga** » March 29th, 2006, 10:46 am

Ranger Abell9,

I can see the point you are making. My question is how would the effect on the Tax Base be if a flat tax of say 10% was imposed across the board on all items sold (seperate from tariffs)? On the surface it seems like a good idea.

What would the detractors be?

VAK · Post by **VAK** » March 29th, 2006, 10:57 am

What would happen to those on a fixed income?

Say disabled veteran's? Elderly? Are you speaking of an income tax, sales tax, how would you implement it?

I've actually liked some flat tax proposals right up to the point that they fail to provide for the elderly, disabled (unable to work) and disabled veteran's. All three groups I feel should be protected as their ability to earn is often impaired. Not always but in many cases.

Rock Island Ranger · March 29th, 2006, 11:07 am

Darksaga wrote:Ranger Abell9,

I can see the point you are making. My question is how would the effect on the Tax Base be if a flat tax of say 10% was imposed across the board on all items sold (seperate from tariffs)? On the surface it seems like a good idea.

What would the detractors be?

The report I saw said that 10% would not float the boat. The number was more like 19-23%. The problem becomes one of consumer frugality. At least, this is what the Tax experts say. If consumers DONT spend as they did on a predictive model then revenue declines for the Govt. and the Govt. will not curb their expenditures. Personally, I like the idea. Also like the flat tax concept for personal taxes but as you know, the Liberals will never let that happen. WHY? Because it would require the downtrodden lazy baby spurtin scum of this country to actually PAY something as opposed to having the Govt. pay them. Democrats will never endorse anything that allows people to stand on their own 2 feet. They NEED to have victims, downtrodden people and who NEED the Govt.

Darksaga · Post by **Darksaga** » March 29th, 2006, 5:29 pm

VAK wrote:What would happen to those on a fixed income?

Say disabled veteran's? Elderly? Are you speaking of an income tax, sales tax, how would you implement it?

I've actually liked some flat tax proposals right up to the point that they fail to provide for the elderly, disabled (unable to work) and disabled veteran's. All three groups I feel should be protected as their ability to earn is often impaired. Not always but in many cases.

VAK,

That really can be a simple fix... make them exempt and ramp the percentage charged to accomodate say to 25% (off of Ranger Abell9's suggested rate of 19-23%). Drop income tax to 5% and increase protective tarriffs. With a total tax base of 30% the tax payers in general may be better off.

***I am just tossing ideas out without any ideas of the numbers involved.***

Goog · Post by **Goog** » March 29th, 2006, 5:54 pm

I just want to be one of the guys eating for free.

Horned Toad · Post by **Horned Toad** » March 29th, 2006, 8:53 pm

Goog wrote:I just want to be one of the guys eating for free.

I want to be the fat cat getting 10 dollars

Rock Island Ranger · Post by **Rock Island Ranger** » March 30th, 2006, 6:45 am

VAK wrote:What would happen to say, disabled veteran's? Elderly?

Fuck em. Roll em off a long pier and feed the sharks. Fucking Tax burdens!

VAK · Post by **VAK** » March 30th, 2006, 1:14 pm

Abell9 wrote:
VAK wrote:What would happen to say, disabled veteran's? Elderly?

Fuck em. Roll em off a long pier and feed the sharks. Fucking Tax burdens!

Yeah, er, wait...

Bwahahahahaha

Vee · Post by **Vee** » March 30th, 2006, 1:17 pm

Yep.

He said "Roll".

chkray · Post by **chkray** » March 30th, 2006, 7:59 pm

Much as I hate to say it, that was pretty damn good, Andy - right on the fucking mark.

Of course, I KNOW you didn't come up with that on your own. You don't have enough toes and fingers to do that kind of ciphering.

I'd be happy to live with a 19% to 23% flat tax: take away the loopholes, exemptions and entitlements and fill out a 1 page tax form where you list your annual salary, multiply that figure by the set %, then write a check to Uncle Sam for whatever that equals.

But like I said - no loopholes or entitlements. Whether you make $10K or $10 Million per year, you pay the flat percentage - period.

It'd be a hell of a lot better than paying the 30 some odd percent that I'm paying now, and just the reduction in paperwork would be worth it.

Vee · Post by **Vee** » March 30th, 2006, 9:32 pm

chkray wrote:
It'd be a hell of a lot better than paying the 30 some odd percent that I'm paying now, and just the reduction in paperwork would be worth it.

So you save 7-15%, but it'd be worth it?

And you say the Pastor can't add?