# taxes - Posted by michaela-ATL

Posted by Glen SoCal on February 18, 2003 at 01:57:40:

Michaela-

Great article. Thanks for posting it.

Glen

taxes - Posted by michaela-ATL

Posted by michaela-ATL on February 17, 2003 at 15:50:48:

Have you ever been the victim of jealousy by non-investors?
I came across this and thought it fit well:

Subject: taxes, simplified

In an effort to provide his students with a comprehensible explanation of tax cuts, the following illustration was employed by :
Thomas L. Davies, LL.M., M.P.A., C.P.A.
Chair of Division of Accounting and Business Law, Professor of Accounting
The University of South Dakota School of Business

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 \$13.33. 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 the proportion of the total bill he’d been paying previously. He then worked out the amounts each should pay as follows:

the fifth man would now pay nothing,
the sixth would pay \$2,
the seventh, \$5,
the eighth, \$9,
the ninth, \$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 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, pointing to the tenth man, “He got \$7!”.

“Yeah, that’s right,” exclaimed the fifth man, “I only saved a dollar, …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 andate 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 !!

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, far too many seem incapable of grasping this rather straightforward logic."

michaela