A Parable of Tax Cuts

[Wild Cobra]

I'm sure many of you have seen this before, but I think a whole lot of liberals need a reminder.


A Dinner for 10 Men
A Parable of Tax Cuts

Over lunch two friends were discussing the government's recent round of tax cuts: - "I'm opposed to those tax cuts," the retired college instructor declared, "because they benefit the rich. The rich get much more money back than ordinary taxpayers like you and me and that's not fair." "But the rich pay more in the first place," the businessman argued, "so it stands to reason that they'd get more money back." He could tell that his friend was unimpressed by this meager argument. Even college instructors are a prisoner of the myth that the "rich" somehow get a free ride in America.

Nothing could be further from the truth. Let's put tax cuts in terms everyone can understand.

Suppose that every day ten men go to a restaurant for dinner. The bill for all ten comes to $100. If it was paid the way we pay our taxes, the first four men 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. The ten men ate dinner in the restaurant every day and seemed quite happy with the arrangement until the owner threw them a curve.

0 + 0 + 0 + 0 + 1 + 3 + 7 + 12 + 18 + 59 = 100 cost of dinner

"Since you're all such good customers, he said, I'm going to reduce the cost of your daily meal by $20." Now dinner for the 10 only costs $80.

The first four are unaffected; they still eat for free. Can you figure out how to divvy up the $20 savings among the remaining six so that everyone gets his fair share? The men realize that $20 divided by 6 is $3.33, but if they subtract that from everybody's share, then the fifth man and the sixth man would end up being paid to eat their meal.

The restaurant owner proceeded to work out the amounts each should pay under the same assumptions: Now the fifth man also paid nothing, the sixth pitched in $2, the seventh paid $5, the eighth paid $9, and the ninth paid $12 leaving the tenth man with a bill of $52 instead of $59. Outside the restaurant, the men began to compare their savings. "I only got a dollar out the $20," complained the sixth man, pointing to the tenth, "and he got 7!"

0 + 0 + 0 + 0 + 0 + 2 + 5 + 9 + 12 + 52 = 80 reduced cost of dinner

"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!"

0 + 0 + 0 + 0 + (-1) + (-1) + (-2) + (-3) + (-6) + (-7)= (-20) savings on dinner

"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 something important. They were $52 short!

And that, boys, girls, and college instructors, is how America's 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 any more.

After all, there are lots of good restaurants
in Switzerland and the Caribbean.

[Trainwreck2100]

i like it better when its in a bar

[Wild Cobra]

i like it better when its in a bar
So do I, but this is the original version, and mentions moving off-shore at the end.

[KenMcCoy]

It happened in 1936-37...wealthy were being taxed so much they just decided to stop doing business.

[ratm1221]

How about this instead...

There are 4 men that are eating together in a restaurant. The first man has $10, the second man has $25, third $30, but the last man has $1,000. The check comes and it is $100. So everyone should have to pay $25. But the first man doesn't have enough money. The second man would break even but wouldn't be able to feed his family for the rest of the week, the third would only have $5 left. But the last man that has $1000 dollars only wants to pay his share but there isn't enough wealth at the table for everyone to put in their equal share and still pay the bill.

So the man with $1000 pays the bill and charges everyone interest.

[ElNono]

I'm sure many of you have seen this before, but I think a whole lot of liberals need a reminder.

That's a great story... in an imaginary world...
In the real world: The richest man doesn't really pay neither the $59 or $52, he tells the restaurant owner to put it on the tab. Now, since he's rich, the owner trusts this guy (where he wouldn't trust the other guys because they're not rich enough, thus they have to pony up). After a few months, the tab grows bigger and bigger. One day, the richest man shows up and tells the restaurant owner he's broke. So what does the restaurant owner do? He sends a bill to all the other non-rich guys to bail out the rich bastard that accrued the debt. So in the end, the rich guy did not pay for those meals, the reduced price didn't affect him at all, and we all the stupid poor end up paying for this motherfucker tab. And that, my friends, is the REAL world.

[Extra Stout]

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 something important. They were $52 short!

And that, boys, girls, and college instructors, is how America's 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 any more.

After all, there are lots of good restaurants
in Switzerland and the Caribbean.
Nice parable. It's not how the law works. Here's how it would work under actual U.S. law.

The nine men surrounded the tenth and beat him up. The next night he didn't show up for dinner, so the nine sent a band of enforcers to his house. The enforcers broke his legs and took enough money to pay for the next ten years' worth of dinners. They also said if he ever showed his face at the restaurant again, they would kill him. So the nine sat down and ate without him.

And that, boys, girls, and college instructors, is how America's tax system really works. If you're rich and are tired of paying taxes, and try to leave the country, the government treats it like tax evasion and forces you to pay their estimate of what your next ten years' worth of taxes would have been. They also seize any remaining U.S. assets you might have and ban you from ever re-entering the country.

If I were a rich man faced with this, I might think about organizing a coup.

[Spurminator]

What did each of them eat?

[DarrinS]

How about this instead...

There are 4 men that are eating together in a restaurant. The first man has $10, the second man has $25, third $30, but the last man has $1,000. The check comes and it is $100. So everyone should have to pay $25. But the first man doesn't have enough money. The second man would break even but wouldn't be able to feed his family for the rest of the week, the third would only have $5 left. But the last man that has $1000 dollars only wants to pay his share but there isn't enough wealth at the table for everyone to put in their equal share and still pay the bill.

So the man with $1000 pays the bill and charges everyone interest.



If Obama was the restaurant manager, he would have the guy with $1000, divide up his money evenly between the other three, just to be "fair".

[101A]

Nice parable. It's not how the law works. Here's how it would work under actual U.S. law.

The nine men surrounded the tenth and beat him up. The next night he didn't show up for dinner, so the nine sent a band of enforcers to his house. The enforcers broke his legs and took enough money to pay for the next ten years' worth of dinners. They also said if he ever showed his face at the restaurant again, they would kill him. So the nine sat down and ate without him.

And that, boys, girls, and college instructors, is how America's tax system really works. If you're rich and are tired of paying taxes, and try to leave the country, the government treats it like tax evasion and forces you to pay their estimate of what your next ten years' worth of taxes would have been. They also seize any remaining U.S. assets you might have and ban you from ever re-entering the country.

If I were a rich man faced with this, I might think about organizing a coup.

:depressed

[boutons_]

TOTAL UNMITIGATED BULLSHIT

eg, Warren Buffet, an extremely successful capitalist, said he pays less taxes than his secretary.

The corps, wealthy, capitalists have the accountants, advisors, lawyers to avoid paying taxes, no matter what the tax rate.

Part of their gaming the system is to pay propagandists (conservtive think tanks, etc, who sucker in assholes like WC, ES, etc) to game the system in their favor every more, and to spread bullshit like this, expecting us to shed tears for their pitiful, helpless selves.

[ratm1221]

If Obama was the restaurant manager, he would have the guy with $1000, divide up his money evenly between the other three, just to be "fair".

Yeah... because that's exactly what he wants to do... :rolleyes

[DarrinS]

Yeah... because that's exactly what he wants to do... :rolleyes

vFC9jv9jfoA

[spurster]

As can be expected from WC, a thoroughly distorted view of taxes. Here is information from two reports on the total marginal tax rate (federal, state, and local) by income. The tax rates are very different in the two reports, but they both show that low income household pay a substantial tax rate:

http://www.taxfoundation.org/publications/show/2282.html

Who Pays Taxes and Who Receives Government Spending?
An Analysis of Federal, State and Local Tax and Spending Distributions,
1991-2004
by Andrew Chamberlain and Gerald Prante
Tax Foundation



Table 14. Federal, State and Local Effective Tax Rates
(Taxes as a Percentage of Comprehensive Household Income),
Calendar Year 2004
Quintiles of Household Cash Money Income, Calendar Year 2004

Bottom 20 Second 20 Third 20 Fourth 20 Top 20
Percent Percent Percent Percent Percent
Total Taxes 12.97% 23.21% 28.25% 31.32% 34.55%
Federal Taxes 5.05% 12.92% 17.37% 20.16% 24.25%
State and Local Taxes 7.92% 10.29% 10.88% 11.16% 10.30%


http://www.nber.org/papers/w12533

Laurence J. Kotlikoff and David Rapson

"Does It Pay, at the Margin, to Work and Save?"
by Laurence J. Kotlikoff and David Rapson
National Bureau of Economic Research



Table 4
Marginal Net Tax Rates on Life-Cycle Labor Supply

Couples
Total Annual Household Earnings ($000s)
Income 10 20 30 50 75 100 150 200 300 500
Rate 2.1% 40.2% 40.1% 32.3% 36.6% 33.3% 42.2% 41.6% 42.8% 49.6%

Singles
Total Annual Household Earnings ($000s)
Income 10 20 30 50 75 100 125 150 200 250
Rate 0.8% 34.7% 36.7% 32.6% 34.6% 39.5% 37.3% 37.7% 40.3% 41.3%

[ratm1221]

vFC9jv9jfoA

Ok, I took the time to watch your video. Maybe I didn't get the whole thing. I missed the party where he asked for the guys paycheck so he could divide it between everyone in the crowd.

[Spurminator]

vFC9jv9jfoA

Did you watch the video?

[George Gervin's Afro]

Ok, I took the time to watch your video. Maybe I didn't get the whole thing. I missed the party where he asked for the guys paycheck so he could divide it between everyone in the crowd.

It's a parable silly. You can make anything up!

[ratm1221]

It's a parable silly. You can make anything up!

The video was a parable?

[Tully365]

Ok, I took the time to watch your video. Maybe I didn't get the whole thing. I missed the party where he asked for the guys paycheck so he could divide it between everyone in the crowd.

:lol Nice post.

[boutons_]

"Even Warren Buffet says that our current tax system unfairly puts more of the tax burden on the working class than the rich. The rich pay more taxes as a total collected, but much less of a percentage as the middle class.


Mr. Buffet goes on to say, "There's class warfare, all right," Mr. Buffett said, "but it's my class, the rich class, that's making war, and we're winning." "

http://www.huffingtonpost.com/mike-garibaldi-frick/class-warfare-the-middle_b_134747.html?view=print

[JoeChalupa]

Just pay your taxes and STFU. If you are making 250K and can't make it then you are living out of your means. I know I wouldn't be bitching about making 250K and paying taxes.

[Wild Cobra]

As can be expected from WC, a thoroughly distorted view of taxes. Here is information from two reports on the total marginal tax rate (federal, state, and local) by income. The tax rates are very different in the two reports, but they both show that low income household pay a substantial tax rate:

This report distorts the facts. It is speaking on marginal tax rates only. Take out the tax credits, and the botton 20% pays nothing in federal. Probably the next 20% too.

The first graph is also a percentage of income. For it to be fair, the percentage would be the same. What the graph show, to any itelligent thinker, is the poor pay a smaller percentage on less income while the rich pay a higer percentage on more income.

It's just not fair.

[Anti.Hero]

ahhhhhhhhhhhh so the 250k magic number is REVENUE.

So basically every small business worth a damn falls into it hahahaha

[Wild Cobra]

It's a parable silly. You can make anything up!

Is it really?

The parable relates in 10% inrements of the population what people pay per $100 in federal income taxes. The bottom 40% pay NOTHING! Most of them get more money back than taken from their pay in tax credits and/or earned income credit.

Now what it des, is show what you libtards think of tax breaks. You are furious that 'only the rich' get tax breaks. Why should the bottom 40% get a tax break when that pay nothing in taxes?

The rich man simply decides to leave his friend, leaving less of a tax base to operate with.

This really hapoens!

[boutons_]

The US wealthy ain't going nowhere. Their capital may flee to off-shore accounts.

McNasty proposes capital gains tax cuts that benefit .... himself and Ice Queen.

Two-Thirds Of The Benefits From McCain’s New Tax Cut Go To Millionaires

http://wonkroom.thinkprogress.org/2008/10/15/mccain-cut-millionaires/

Just more trickle-down bullshit that in fact is really piss-down.

[Anti.Hero]

You must be a real idiot if you can't benefit from trickle-down.

[ElNono]

Is it really?

The parable relates in 10% inrements of the population what people pay per $100 in federal income taxes. The bottom 40% pay NOTHING! Most of them get more money back than taken from their pay in tax credits and/or earned income credit.

Now what it des, is show what you libtards think of tax breaks. You are furious that 'only the rich' get tax breaks. Why should the bottom 40% get a tax break when that pay nothing in taxes?

The rich man simply decides to leave his friend, leaving less of a tax base to operate with.

This really hapoens!

I know a pretty close person that made $20K last year... I gather that's within the 40% you're talking about? He had to pay $900 in federal taxes at the end of the year... So how is it that the 40% don't pay nothing?

[Wild Cobra]

I know a pretty close person that made $20K last year... I gather that's within the 40% you're talking about? He had to pay $900 in federal taxes at the end of the year... So how is it that the 40% don't pay nothing?
When you take it by all filing status and dependents, about 40% pay no taxes. In this case, if your friend probably had no dependants, made $20,000 with no deductions, then he had a taxble income of $11,250 for a tax liability of $1,293. What happens if you get more people with dependant children in this lower 40%. You get I think a $1,000 tax credit per child, plus earned income credit with one or more qualifying children. This takes the zero tax dollars owed to the federal govenment to about the $43,000 mark for a family of four, or a single mother with three children. Enough tax filers fall into a zero tax payment status, or actually get money, that there are about 40% of the filers in this status.

[ElNono]

When you take it by all filing status and dependents, about 40% pay no taxes. In this case, if your friend probably had no dependants, made $20,000 with no deductions, then he had a taxble income of $11,250 for a tax liability of $1,293. What happens if you get more people with dependant children in this lower 40%. You get I think a $1,000 tax credit per child, plus earned income credit with one or more qualifying children. This takes the zero tax dollars owed to the federal govenment to about the $43,000 mark for a family of four, or a single mother with three children. Enough tax filers fall into a zero tax payment status, or actually get money, that there are about 40% of the filers in this status.

I find it hard to believe. But hey, I'll take your word for it.

[ratm1221]

When you take it by all filing status and dependents, about 40% pay no taxes. In this case, if your friend probably had no dependants, made $20,000 with no deductions, then he had a taxble income of $11,250 for a tax liability of $1,293. What happens if you get more people with dependant children in this lower 40%. You get I think a $1,000 tax credit per child, plus earned income credit with one or more qualifying children. This takes the zero tax dollars owed to the federal govenment to about the $43,000 mark for a family of four, or a single mother with three children. Enough tax filers fall into a zero tax payment status, or actually get money, that there are about 40% of the filers in this status.

So help me understand this. Conservatives are against abortion, but they don't like to pickup up the slack for low income families that can't afford to feed those same kids they wanted to live? Do I have that correct?

[Wild Cobra]

So help me understand this. Conservatives are against abortion, but they don't like to pickup up the slack for low income families that can't afford to feed those same kids they wanted to live? Do I have that correct?

It's irresponsible to have kids you cannot care for. There are also thousands of families who want to adopt newborn babies. Not grown children.

Ever hear of adoption?

[George Gervin's Afro]

It's irresponsible to have kids you cannot care for. There are also thousands of families who want to adopt newborn babies. Not grown children.

Ever hear of adoption?

In other words he can't defend fighting for every life to be born to then turn around and gut whatever federal programs available for the same children he loves.

[KenMcCoy]

So help me understand this. Conservatives are against abortion, but they don't like to pickup up the slack for low income families that can't afford to feed those same kids they wanted to live? Do I have that correct?

They don't like to see people get paid to have more kids. That is what the child credits do.