Truism about the tax structure basics.

[FRISKY]

This has been sent out as an email for years and posted on the net in many places, but that doesn't undermine its validity or truth.

Basic Economics


Suppose that every day, ten men go out to eat 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 ate out 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." Food for the ten
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 eat 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 eat his food.
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 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 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 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 to eat, 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, ladies and gentlemen, 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 to eat overseas
where the atmosphere is somewhat friendlier.

David R. Kamerschen, Ph.D.
Professor of Economics
University of Georgia

[dismayed]

The article was erroneously attributed to David R. Kamerschen; he has said he did not write it. Other version fo the article have been attributed to T. Davies of the University of South Dakota. Professor Davies has publicly said that he did not write the article, but that he did hand it out in class as an assignment. The objective was to present his business students with an overly simplistic explanation of our tax system and to have them think critically about it... to come up with arguing points on what is wrong with the article, and also what truths are in the article.

No one seems to know the actual origin of the article. A very early version was printed in a newspaper by some local Joe who wrote in, but the investigative folks at Snopes are not convinced that even he is the true author of the piece.

Now back to our previous program....