This is a copy of an email recently sent to me.
Sometimes politicians, journalists and others exclaim; 'It's just a tax
> cut for the rich!' and it is just accepted to be fact, without
> questioning it.
> But what does that really mean?
>
> Just in case you are not completely clear and/or do not understand this
> issue, the following should help, if you are a reasonable person.
>
> Let's put tax cuts in terms everyone can understand.
>
> Suppose that every day, ten men go out for beer and 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 would pay $7.
> The eighth would pay $12.
> The ninth would pay $18.
> The tenth man (the richest) would pay $59.
> So, that's what they decided to do.
> The ten men drank in the bar every day and seemed quit e happy with the
> arrangement, until on 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 beer by $20.'Drinks for the ten of you now cost just
> $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 drink for free. But
> what
> about the other six men - the paying customers? How could they divide
> 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 man and the sixth man would each
> end up being paid to drink his beer.
>
> So, the bar 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 pay.
>
> And so:
>
> The fifth man, like the first four, now paid nothing (100% savings).
> The sixth now paid $2 instead of $3 (33%savings).
> The seventh now pay $5 instead of $7 (28%savings).
> The eighth now paid $9 instead of $12 (25% savings).
> The ninth now paid $14 instead of $18 (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 drink 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.
> It's unfair that he got ten times more than I!'
>
> '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 exploits the poor!'
>
> The nine men surrounded the tenth and beat him up.
>
> The next night the tenth man didn't show up for drinks, so the nine sat
> down and had beers 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 anymore. In fact, they might
> start
> drinking somewhere else where the atmosphere is friendlier.
>
> David R. Kamerschen, PhD
> Professor of Economics
> University of Georgia
> CLEAR EXPLANATION OF TAX CUTS
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