Cathy in the Wright

School on Saturday?!

Erudite reader Aelfheld sent me an email containing the following. Since the IRS is rattling their tin cups on the bars, reminding us that 4/15 is right around the corner, I thought Aelfheld's information couldn't have come at a better time.

While you're watching the political commercials and
listening to the politicians spin their web around
unsuspecting and misinformed people . . . a "Reality"
lesson in economics.

Top 1% earn 21% of all income pay 37-1/2% of all taxes
Top 5% earn 35% of all income pay 56-1/2% of all taxes
Top 10% earn 46% of all income pay 67% of all taxes
Top 25% pay 84% of all taxes
Top 50% pay 96-1/2% of all taxes
Bottom 50% pay 3-1/2% of all taxes

Just in case you are not completely clear on this
issue, we hope the following will help:

Tax Cuts - A Simple Lesson In Economics

This is how the cookie crumbles. Please read it
carefully.

Let's put tax cuts in terms everyone can understand.
Suppose that every day, ten people go out for dinner.
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 people (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 person (the richest) would pay $59.

So, that's what they decided to do. The ten people 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 the ten only cost $80. The group
still wanted to pay their bill the way we pay our
taxes. So, the first four people 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 people realized that $20 divided by six is
$3.33. But if they subtracted that from everybody's
share, then the fifth person and the sixth person
would each end up being 'PAID' to eat their meal. So,
the restaurant owner suggested that it would be fair
to reduce each person's bill by roughly the same
amount, and he proceeded to work out the amounts each
should pay.

And so:

The fifth person, 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 paid (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 people began to compare their
savings.

"I only got a dollar out of the $20," declared the
sixth person. He pointed to the tenth person "but he
got $10!"

"Yeah, that's right," exclaimed the fifth person. "I
only saved a dollar, too. It's unfair that he got ten
times more than me!"

"That's true!!" shouted the seventh person. "Why
should he get $10 back when I got only $2? The
wealthy get all the breaks!"

"Wait a minute," yelled the first four people in
unison. "We didn't get anything at all. The system
exploits the poor!"

The nine people surrounded the tenth and beat him up.

The next night the tenth person 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.

There are lots of good restaurants in Europe and the
Caribbean.