This is a VERY simple
way to understand the tax laws. Let's put tax cuts in terms everyone
can understand. Suppose that every day, ten men 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 men -- 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 man -- the richest -- would pay $59.
That's what they decided
The ten men ate dinner
in the restaurant every day and seemed quite happy with the arrangement
- until one day, the owner decided to give them a break.
"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 men
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 men 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 end up being *paid*
to eat their meal.
So the restaurant 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
And so the fifth man paid
nothing, the sixth pitched in $2, the seventh paid $5, the eighth
paid $9, the ninth paid $12, leaving the tenth man with a bill of
$52 instead of his earlier $59.
Each of the six was better
off than 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. "But he got $7!"
"Yeah, that's right,"
exclaimed the fifth man. "I only saved a dollar, too. It's
unfair that he got seven times more than me!"
shouted the seventh man. "Why should he get $7 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 he 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 were
And that, journalists
and college professors, is how the tax system works.