How Our Tax System Works

Just in case you are not completely clear on this issue,
the following might help.


Let’s put tax cuts in terms everyone can understand.  Suppose that every day, ten men go out for
beer and the bill for all ten comes to $100.
If they paid their bill the way we pay our taxes, it would go something



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 drank in the bar every day and seemed quite
happy with the arrangement, until on 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 beer by $20.”Drinks 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 drink for free. What about
the other six men, those paying the tab?
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 drink his
beer.  So, the bar 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:


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 pay $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 drink 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 I!”


“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 drinks,
so the nine sat down and had beers 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 drinking overseas where the
atmosphere is somewhat friendlier.

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