Two very good examples to describe how things actually work as compared to the "Class-Warefare" that Obama is throwing around....
Suppose that every day, ten men go out for dinner and the bill for all 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 like they do now with the present income tax structure.
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 of the bill.
So that is what the ten men decide 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 all are such good customers I am going to reduce the cost of your daily meal by $20”. Dinner for the 10 men now costs just $80...
The group still wanted to pay the bill the same way that they paid their taxes so the first four men were unaffected. They would still eat for free. But what about the other six men -- the Paying customers? How could they divide the $20 windfall so that everybody would get his “Fair Share”?
They realized that $20 divided by six is $3.33. But they subtracted that from everybody’s share, then the fifth and sixth man would each end up being paid to eat their meal…So, the restaurant owner suggested it would be fair to reduce each mans bill roughly the same amount; and proceeded to work out the amounts each man would pay.
The fifth, like the first four now paid nothing (100% savings).
The sixth man now paid $2 instead of $3 (33% savings)
The seventh man now paid $5 instead of $7 (28% savings)
The eight man now paid $9 instead of $12 (25% savings)
The ninth man now paid $14 instead of $18 (22% savings)
The tenth man now paid $49 instead of $59 (16% savings)
Each of the six was better off then 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. Its 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 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 exploit’s the poor!”The nine men surrounded the tenth man and beat him up…
The next night the Tenth man did not 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 the bill!
And that Boys & 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 might not show up anymore. In fact, they might start eating overseas where the atmosphere is somewhat friendlier…David R. Kamerschen, PH.DProfessor of EconomicsUniversity of Georgia
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5 comments:
Once again, this is pretending that income tax is the only tax out there. When you include FICA, Medicare, sales taxes, gas taxes, property taxes, etc., low income people wind up paying a higher percentage of their income than do the very wealthy.
That's not to say that taxing the rich is a solution to our budget woes, but acting as if their nominally higher payments are the equivalent of higher percentage payments is silly.
and once again it's personalizing this to Obama..
the tax code worked very similarly under Reagan, Clinton and Bush....
Obama has done nothing to change it and has advocated going back to the rates for everyone that were under the previous presidents ...
but the anti_Obama folks are bound and determined to put all of this on him...
it really says something about those who are engaging in this.
it's totally bizarre that things in the tax code and policy that have been that way for years, decades are now Obama's fault.
the right these days is totally nuts...
they blame Obama for the policies created by his predecessors including Reagan and Bush..
it's nutty.
Evan,
True that many on the lower rung may pay a higher % of their total income when you add all of the many taxes out there but do we also consider what they get in assistance?
There has been much talk about the people at poverty rate raising and the rate is $22k for a family of four. But when they say $22k is that reported income and does it include benefits receieved? I do not know and asking this. Does the 22k include the benefit of food stamps? Energy assistance? Housing assistance? What do they count?
If I had the govt giving me money for food, electric/water bill, rent bill, etc and did not have to pay for those items I would have a real nice "actual" income...
Do you know what is counted?
Larry,
The tax cuts and codes for Reagan and Bush both reduced the tax burden for all across the board for ALL taxpayers. In fact the Bush taxcuts eliminated the lowest bracket and millions from paying fed income tax at all. So if we need to raise taxes, and yes returning or allowing the Bush taxcuts to expire is a tax hike, should we not raise taxes for all income tax payers to be fair? It's not class warfare to only target the higher brackets when in fact they already pay the highest amount of fed tax? and what about the lower 45% of people who pay no fed income tax at all? Should not everybody be involved in the solution to this problem or as in the example above, more than half who eat the meal but pay nothing but benefit from others paying?
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