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Author Topic: Taxes
FiredrakeRAGE
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I pulled this off a comment at Q&O blog. It was apparently first said by a professor of Economics at Georgia University.

quote:
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
pay 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.
. 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 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 of $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 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 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 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.

The post to which it is related is also interesting: [Q&O Blog]

Just some food for thought [Smile]

Edited to add: Just FYI - this applies to the Federal Individual Income Tax only...

[ June 11, 2007, 01:06 AM: Message edited by: FiredrakeRAGE ]

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DonaldD
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Of course, each man is eating a significantly different meal, with a significantly different price...
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stormghost
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This thread caught my eye, as I just paid my estimated Federal taxes for this quarter. It reminded me of something Heinlein wrote:

quote:
Throughout history, poverty is the normal condition of man. Advances which permit this norm to be exceeded -- here and there, now and then -- are the work of an extremely small minority, frequently despised, often condemned, and almost always opposed by all right-thinking people. Whenver this tiny minority is kept from creating, or (as sometimes happens) is driven out of a society, the people then slip back into abject poverty. This is known as 'bad luck.'
Best,
G

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DaveS
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The story works the other way, too. 10 men show up in a hospital with the same illness. 4 are turned away, because they can't afford health insurance, ...the 10th man can afford to find the best man in the field anywhere in the US, and does...the widows of the poor men say, if only they would have helped us...
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Colin JM0397
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You sure about that Dave? They turn away sick people at the hospital and then those people die? If poor people are turned away, why do we have a problem with (poor) illegal immigrants coming here and putting a financial strain on our government-sponsored health care programs?

You're comparing apples to oranges except you're using real apples vs. those fake plastic oranges from the display case.

Storm - Yea, just like Zimbabwe is currently “suffering bad luck".

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DaveS
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Are you saying there is no correlation between income, access to health care and mortality? I took a small leap from dinner to illness using the same population as in the parable FDR gave, but you're extending it to illegal immigration and plastic fruit.

[ June 11, 2007, 10:11 AM: Message edited by: DaveS ]

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LoverOfJoy
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The worst off are the poor that don't quite qualify for all the various aid out there. Poor and pregnant? Medicaid will cover just about everything.
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Colin JM0397
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Dave, better than plastic blow up dolls [Wink]

I mentioned immigrants simply to highlight that there is health care to be had by "poor" people. You didn't mention a correlation or discuss those mortality rates and such, but threw out a hyperbole about dying poor people and their widows

LOJ - agreed. The problem is with the working poor, not the destitute who do have programs to assist them (if it’s proper assistance or worthwhile is another discussion, of course).

Alas, we're talking about taxes...

FDR, you'll never get the more liberal-minded to agree to what you're getting at, or even admit you have some sort of point. Not that they are "wrong" and you are "right", but because at the root of it all you (conservative-minded) and them (liberal-minded) do not agree on what "fair" is, what "I earned it" means, and what level of responsibility people have.

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DaveS
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Colin, you're right. I was replying "in kind" to the parable that led off the thread, easy on the mind, but not so easy on the reality. I wasn't intending to pick on you or FDR. The article seems to imply that it is simply rude for those in need to question the generosity of the rich, and if they feel offended, they will simply withhold their largesse. Presumably, then the solution for the poor would be to let them eat cake.

[Edited to add] But, let me be clear. There needs to be a good correlation between taxes and the uses to which they are put. Eliminating fraud and abuse from the government is necessary, but not sufficient. Do we have the right programs, are we spending money on things that reward behaviors that don't contribute to the general welfare, etc, etc. The rich deserve to keep their money, but if the government doesn't serve the needs of the poor and others, it's not a particularly good government. Taxation is how the government raises the money it needs to do those things. I would think both liberals and conservatives would agree with that.

[ June 11, 2007, 11:06 AM: Message edited by: DaveS ]

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Wayward Son
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Of course, what the Professor neglected to mention was that the one rich guy made more money per year than the five poorest guys together, and that they all had to pay the same amount for cab fare to get to the restaurant.

So the $3 increase in cab fare ate up more than the sixth and seventh's guys savings, all of the eighth's guys savings, and most of the ninth's guy savings, while the rich guy is still whining that he has to pay too much and it is totally unfair. [Smile]

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Colin JM0397
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Actually, what happened was the rich guy was so mad at paying more than his fair share for those who couldn’t afford their meal that he offered each of the poor guys a job right then and there.

And they all lived happily ever after - especially the rich guy who then got to exploit his new workers and get his money back by earning money off their labors while paying them a measly middle class income with full benefits and day care for their kids.

Humph, what a prick that rich guy is!

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Lobo
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The rich guys also probably have 100k+ of student aid debt that enabled him to get an education so that they could get a good job in the first place.

I detest the poor complainers who choose not to take advantage of the education system in this country.

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martel
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"And they all lived happily ever after - especially the rich guy who then got to exploit his new workers and get his money back by earning money off their labors while paying them a measly middle class income with full benefits and day care for their kids."

Uh...unless he didn't and, obeying the rules of unfettered capitalist economics, paid them slightly over the wages of their former jobs, which for 4 of them is probably barely enough to pay the rent.

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martel
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"I detest the poor complainers who choose not to take advantage of the education system in this country."

You're right. The people I know whose families have 5 kids and not enough money to begin with and therefore can't get enough money for a good college and have to go to community college on scholarship, and then get out to discover that actually, no one's gonna hire you for more than about 25k a year if all you've got is a community college business degree, or whatever.

edit: I live in a mostly middle and upper class town and I know quite a few people like that. I have no idea how it must be in real poor neighborhoods.

[ June 11, 2007, 06:52 PM: Message edited by: martel ]

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Lobo
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My point is that if you want to, most serious students can get into a decent state university. They may have to use government funded loans and grants, and may have some debt at the end of it, but that is the price to pay for an education.

I don't buy your argument that poor/middle class kids only option is community college.

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FiredrakeRAGE
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Martel -

I'm not sure what the number of kids has to do with anything. The kids would be getting their own loans. Speaking as someone from a middle class family, I had issues getting anything but private loans owing to the wealth of my family - despite the fact that they did not pay for my college. I just finished paying off $50K worth of private loans that paid for my school.

As for income equality we can remove some of the parable from the thread here by examining the link attached the my initial post. It provides some hard data on money received vs. benefits. I am not, however, confident of the indirect benefits (roads, for example).

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flydye45
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Hmm. Four years in the National Guard offers the GI Bill (cash every month), and a mostly free education in most State Universities. For a weekend a month and 15 days a year.

We'll ignore the technical education additionally offered for many AFSC's.

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Zyne
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FDR, Stafford loans aren't need based, and the problems you had getting them were a result of your school's choice in awarding them, not the government's. Further, how you were able to take out $50k in private loans without owning some sizable assets yourself, or having a cosigner who had some sizable assets? That style of funding isn't available to some kid from the projects whose mother is on welfare and whose father is unknown.
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