DEMOCRATS IN DISARRAY ON ECONOMY (RNC Research)

Republican National Committee ^ | 9 January 2003 | RNC Research Department

[Willing To Listen]

HOW THE TAX SYSTEM REALLY WORKS


A good time to resurrect this description of "how taxes work"...


This is a VERY simple way to understand the tax laws. 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.

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 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 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 straightforward logic!



NOTE:

The copy I received of this credited a Professor of Business Law as the author. When I complemented him for his wisdom via e-mail, he said: "I am unaware of the true author's identity, which is unfortunate, since the piece has generated considerable interest. Unfortunately, one of my students sent it along and erroneously contributed the authorship to me."

[PhiKapMom]

Laugh In

That's what I am thinking he was on too! Someone just told me they thought he was on the Smothers Brothers.

[PhiKapMom]

Thanks for posting that! Very good analysis of the tax system. Kudo's to the professor who wouldn't take the credit since he didn't come up with it.

[Reagan Man]

President Bush continues to have the upper hand and Democrats have nothing substantive to offer America, so they resort to their standard class warfare attacks. With no power whatsoever, Democrats have turned ugly and mean spirited. It's not a pretty sight.

[driftless]

Even Bill the Creep knew that the great majority of Democratic programs and iniatives were and are miserable failures. That's why he ran a stealth program trying to pass himself off as a moderate Dem and steal Republican policies.

[driftless]

I'll have you know pal that the majority of white male boomers like myself vote Republican. I suggest you stop trying to anoint your generation as saints. There's plenty of clueless liberals in all age groups.

[BOBTHENAILER]

Yeah, anybody STOOOOPID enuff to Vote Fer RATS must pay into yer Disability Fund 'cuz yer obviously Ignorant DOLTS who need Medical Assistance!!!

Perfectly summarized.

[BOBTHENAILER]

PROUD TO BE ONE OF THE WRONG PEOPLE!

Perfect.

[PhilDragoo]

Demunists strive to wreck the economy and undermine our security.

They are the wrong people.

[My2Cents]

White male boomers, sure, but not the generation as a whole. Women boomers overwhelmingly vote Dem.

By the way, I'm a baby boomer myself, born and raised in the SF Bay Area, so I've seen first hand the unvarnished self-absorption and irresponsibility of my generation.

[blackie]

The rats are sure fun to watch when they're not in power. :)

Be Well - Be Armed - Be Safe - Molon Labe!

[TLBSHOW]

BUMP

[katana]

The Smothers Brothers