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Tax Cuts - A Simple Lesson in Economics*

This is how the cookie crumbles. Read it carefully. 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 5th pays $1
Sixth would pay $3
The seventh $7
The eighth $12
The ninth $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." So now dinner for the
ten only cost $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, 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 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 amounts each 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 $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. "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 $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
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 at the table
anymore. There are lots of good restaurants in Europe and the
Caribbean.

___________________________________________________________________________
and now for number two

A young woman was about to finish her first year of college. Like many others her age, she considered herself to be a liberal Democrat, and was in favor of the redistribution of wealth.

She was deeply ashamed that her father was a staunch Republican, a feeling she openly expressed. Based on the lectures that she had participated in, and the occasional chat with a professor, she felt that her father had for years harbored an evil, selfish desire to keep what he thought should be his.

One day she was challenging her father on his opposition to higher taxes on the rich and the addition of more government welfare programs. The self-professed objectivity proclaimed by her professors had to be the truth and she indicated so to her father. He responded by asking how she was doing in school. Taken aback, she answered rather haughtily that she had a 4.0 GPA, and let him know that it was tough to maintain, insisting that she was taking a difficult course load and was constantly studying, which left her no time to go out and party. She didn't have time for a boyfriend, and didn't really have many college friends because she spent all her time studying.

Her father listened and then asked, "How is you friend Audrey doing?" She replied, "Audrey is barely getting by. All she takes are easy classes, she never studies, and she barely has a 2.0 GPA. She is so popular on campus, college for her is a blast. She's always invited to parties, and lots of times she doesn't even show up for classes because she's too hung over."

Her father asked his daughter, "Why don't you go to the Dean's office and ask him to deduct a 1.0 off your GPA and give it to your friend who only has a 2.0. That way you will both have a 3.0 GPA and certainly that would be a fair and equal distribution of GPA."

The daughter, visibly shocked by her father's suggestion, angrily fired back, "That wouldn't be fair! I have worked really hard for my grades! I've invested a lot of time, and a lot of hard work! Audrey has done next to nothing toward her degree. She played while I worked my tail off!"

The father said, "Welcome to the Republican Party".