While we’re watching the political commercials and listening to the
politicians spin their web around unsuspecting and misinformed
people…here’s 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 we are not completely clear on this issue, here is an old
story that we hope will help explain our US Tax System…….
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 (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 I got!”
“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.
