 
			 
              
                
                CA in Practice
                
                   8307 Points
                   Joined August 2012
                
               
			  
			  
             
			
			
			
            
           
	You've heard the cry in the past  "It's just a tax cut for the rich!" and it is accepted as fact. But what does that really mean?  The following explanation may help.
	
	Suppose that every day, 10 men go out for dinner. The bill for all 10
	comes
	to $100.  They decided to pay their bill the way we pay our taxes, and
	it
	went like this:
	   The first four men (the poorest) paid nothing.
	   The fifth paid $1.
	   The sixth $3.
	   The seventh $7.
	   The eighth $12.
	   The ninth $18.
	   The tenth man (the richest) paid $59.
	
	All 10 were quite happy with the arrangement, until one day, the owner
	said: "Since you are all such good customers, I'm going to reduce the
	cost
	of your daily meal by $20."
	
	So now dinner for the 10 only cost $80.     The group still wanted to
	pay
	their bill the way we pay our taxes.     The first four men were
	unaffected. They would still eat for free. But   how should the other
	six,
	the paying customers, divvy up 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 and sixth men would each end up
	being paid to eat.
	
	The restaurateur suggested reducing each man's   bill by roughly the
	same
	percentage, thus:
	   The fifth man, like the first four, now paid nothing (100% saving).
	   The sixth paid $2 instead of $3 (33% saving).
	   The seventh paid $5 instead of $7 (28% saving).
	   The eighth paid $9 instead of $12 (25% saving).
	   The ninth paid $14 instead of $18 (22% saving).
	   The tenth paid $49 instead of $59 (16% saving).
	
	Each of the six was better off, and the first four continued to eat for
	free, but 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!". "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. The nine sat
	down
	and ate without him, but when they came to pay the bill, they
	discovered
	that they didn't have enough money between all of them for even half of
	it.
	
	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.