THIS IS A VERY GOD EXPLANATION OF OUR INCOME TAX SYSTEM
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THIS IS A VERY GOD EXPLANATION OF OUR INCOME TAX SYSTEM
Subject: The US tax code----Excellent!!!
I really like what the professor said in the last sentence.
Most do not
understand economics and this makes the tax system rather
plain so that
anyone should be able to understand it
EXPLAINING OUR UNITED STATES TAXING SYSTEM WITH BEER
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
like this:
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 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 beers 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.
But what about the other six men - the paying customers?
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.
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 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 very 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 DO
get the most
benefit from a tax reduction. They also PAY more than the
rest. 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.
David R. Kamerschen, Ph.D.
Professor of Economics
University of Georgia
For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible!
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