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.
