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Jason F-18

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With all of the posts and discussions going on about taxes and the breaks that the poor or wealthy get, I thought this was appropriate. I think that this is one of the clearest and simplest ways to summarize how our tax system works, and the attitudes surrounding changes to it.

I'm sure there will be plenty of comments about this. I ask this, before replying with something smart, think long and hard about what you would do and how it would seem to others.

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 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 beer by $20. Drinks 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 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 overseas where the atmosphere is somewhat friendlier.

David R. Kamerschen, Ph.D.
Professor of Economics, University of Georgia
 
What the Professor failed to mention.....is that all ten men regardless of income, pay the SAME rate on sales tax, gasoline tax, licenses , fees, property tax, sin taxes, and parking tickets. The rich man pays a high dollar tax attorney to reduce his bill. When all of the above taxes and fees are paid, the rich man pays a smaller portion of his financial pie to the tax man. The rich have been threatening to take their ball and go home for decades. History does not bear it out. They "showed up" 10 years ago when their rates were 4.6% higher. For the past decade the rich enjoyed the largest slice of the Bush tax cuts. Did it trickle down to the rest of us??? Worker production went way up during that span, did wages? NO. All that money must have went somewhere.... Where did it go? It didn't trickle down like they told us it would. The only thing that "trickled down" (to a deficit) was the budget SURPLUS left by the last Democrat to be in the White House. I'm tired of the Rich man (and those defending him) "trickling down" on me and telling me it's raining.
 
I am not rich, nor is anyone in my family! But all I can say after reading that is for the first nine to learn more or work harder! The Original American Way! Not what can I get, but what can I EARN!
 
grayson_garrett - 7/26/2010 11:47 PM

I am not rich, nor is anyone in my family! But all I can say after reading that is for the first nine to learn more or work harder! The Original American Way! Not what can I get, but what can I EARN!

AMEN!
 
outcaster - 7/26/2010 10:41 PM

What the Professor failed to mention.....is that all ten men regardless of income, pay the SAME rate on sales tax, gasoline tax, licenses , fees, property tax, sin taxes, and parking tickets. The rich man pays a high dollar tax attorney to reduce his bill. When all of the above taxes and fees are paid, the rich man pays a smaller portion of his financial pie to the tax man. The rich have been threatening to take their ball and go home for decades. History does not bear it out. They "showed up" 10 years ago when their rates were 4.6% higher. For the past decade the rich enjoyed the largest slice of the Bush tax cuts. Did it trickle down to the rest of us??? Worker production went way up during that span, did wages? NO. All that money must have went somewhere.... Where did it go? It didn't trickle down like they told us it would. The only thing that "trickled down" (to a deficit) was the budget SURPLUS left by the last Democrat to be in the White House. I'm tired of the Rich man (and those defending him) "trickling down" on me and telling me it's raining.

So who invented all those taxes you talk about? Your wonderful gov't you speak so highly of. Furthermore you don't have to be rich to take advantage of tax breaks. Heck a paper delivery boy can take advantage depreciate his vehicle, mileage, maintenance, etc. etc. By the way the top 10% of all income earners pay 60% of all the income taxes. So it looks like your financial pie statement is just false.
 
outcaster - 7/26/2010 11:41 PM

What the Professor failed to mention.....is that all ten men regardless of income, pay the SAME rate on sales tax, gasoline tax, licenses , fees, property tax, sin taxes, and parking tickets.

--- you're right, the pay the same RATE (or percentage) not the same amount (with the exception of licenses and parking tickets, not sure why these were included. emoScratch These, everyone will pay the same AMOUNT) which means that becasue they make more, the wealthier purchase more expensive items and property. Therefore, they pay more in sales tax, gas tax, property tax, and sin tax. I fail to see the point you were making here. This just shows that because the wealthier make more, they carry a larger burden of the tax load. This is not even taking in to account the progressive income tax, which penalizes those who make more becasue someone in our wonderful government deems that anyone who makes over a certain amount, is making too much and should help out our gov't budget more, instead of putting those dollars into the national economy through private businesses, which are able to provide much more goods per dollar.


The rich man pays a high dollar tax attorney to reduce his bill. When all of the above taxes and fees are paid, the rich man pays a smaller portion of his financial pie to the tax man.

---- As was mentioned above, ANYONE can take advantage of tax breaks. Are there more available for people who make and spend more? Sure. But they aren;t enough to take their taxable income and therefore tax rate lower than someone in the middle class. They way you talk, all rich Americans are Republicans who want lower tax rates. How about people like Opera, or even the 3rd richest man in the world, Warren Buffett, who is a Democrat and openly supports Obama. He even stated that he only pays 17.7% on his $46 million in income per year. So much for all the RICH Republicans taking advantage of the tax system.


The rich have been threatening to take their ball and go home for decades. History does not bear it out. They "showed up" 10 years ago when their rates were 4.6% higher. For the past decade the rich enjoyed the largest slice of the Bush tax cuts. Did it trickle down to the rest of us??? Worker production went way up during that span, did wages? NO. All that money must have went somewhere.... Where did it go? It didn't trickle down like they told us it would. The only thing that "trickled down" (to a deficit) was the budget SURPLUS left by the last Democrat to be in the White House. I'm tired of the Rich man (and those defending him) "trickling down" on me and telling me it's raining.

So, in closing, would you join the first nine in beating up the tenth and want him to leave the table with his 59% of the tab?
 
Sniper, You just don't get it. There are much more to taxes (money collected to pay for things all of us share equally), than just income taxes. I'll break it down for you to help you understand. When you buy groceries at the store, the clerk does not ask how much money you make. Both the rich man and the poor man pay an extra 10.75%. When you bought your fishing license this year, did they ask if you fished from the bank?, from a jon boat? or from a 21ft Allison with a merc 275? No, the fee was $22. When someone gets pulled over for speeding is the ticket more if the driver is in a Lexus or a Dodge Neon? Nope, its the same for both. The same applies to SS and Medicare, both around 15% for the burger flipper on up the pay scale. So when you look at it that way (realistically) It becomes plain to see (at least for me) that the rich man spends less of his wealth on taxes and fees than the poor man. It's called math! Don't take my word for it..... Listen to what Warren Buffett, the 3rd richest man in America has to say about tax rates and the rich.
http://www.youtube.com/watch?v=Cu5B-2LoC4s
 
outcaster - 7/27/2010 1:43 PM
Listen to what Warren Buffett, the 3rd richest man in America has to say about tax rates and the rich.
http://www.youtube.com/watch?v=Cu5B-2LoC4s

Wow! I had no idea Warren Buffett was the third richest man in America.
How could this possibly be? Warren Buffett is a democrat. I have heard and read that all rich people were Republicans. Something is just not right here.
 
outcaster - 7/27/2010 12:43 PM

Sniper, You just don't get it. There are much more to taxes (money collected to pay for things all of us share equally), than just income taxes. I'll break it down for you to help you understand. When you buy groceries at the store, the clerk does not ask how much money you make. Both the rich man and the poor man pay an extra 10.75%. When you bought your fishing license this year, did they ask if you fished from the bank?, from a jon boat? or from a 21ft Allison with a merc 275? No, the fee was $22. When someone gets pulled over for speeding is the ticket more if the driver is in a Lexus or a Dodge Neon? Nope, its the same for both. The same applies to SS and Medicare, both around 15% for the burger flipper on up the pay scale. So when you look at it that way (realistically) It becomes plain to see (at least for me) that the rich man spends less of his wealth on taxes and fees than the poor man. It's called math! Don't take my word for it..... Listen to what Warren Buffett, the 3rd richest man in America has to say about tax rates and the rich.
http://www.youtube.com/watch?v=Cu5B-2LoC4s

Yes I understand mostly from my Economics degree I have from the University of Georgia that sales taxes and sin taxes are regressive by definition. I am all for doing away with most of them. Especially the 160% increase in tobacco tax that your President Obama signed into law during his first month. As I have said before it disproportionately affected the poor 27 times more than an increase in income taxes would have. I am for sun setting the current SS and Medicare taxes because it is at best a national ponzi scheme. I would much rather keep my money and invest it the way I want to instead of giving it to the government to waste. Here is some math for you. Who do you think pays more in real dollars the man that buys the Lexus or the man that buys the Dodge Neon. While they may pay the same % rate the rich man with the Lexus pays more money because the Lexus is obviously priced higher. So we could make the assumption that wealthier people probably consume more dollar wise than the poor. I can't explain it in any more elementary terms than that hope you get it. Yes I am familiar with Buffets secratary paying a higher percentage than he did but she didn't donate millions to charity to reduce her taxable income.
 
cheez - 7/27/2010 2:21 PM

outcaster - 7/27/2010 1:43 PM
Listen to what Warren Buffett, the 3rd richest man in America has to say about tax rates and the rich.
http://www.youtube.com/watch?v=Cu5B-2LoC4s

Wow! I had no idea Warren Buffett was the third richest man in America.
How could this possibly be? Warren Buffett is a democrat. I have heard and read that all rich people were Republicans. Something is just not right here.

Came as quite a shock to me too! Turns out though, after a little research I learned that..... some Democrats are wealthy, some own a firearm and hunt and fish, some are veterans, some have a job and pay taxes, some have never actually been on Welfare, some even marry someone from the opposite sex, and some have been to church. ;)
 
Sniperchoke - 7/27/2010 2:40 PM

outcaster - 7/27/2010 12:43 PM

Sniper, You just don't get it. There are much more to taxes (money collected to pay for things all of us share equally), than just income taxes. I'll break it down for you to help you understand. When you buy groceries at the store, the clerk does not ask how much money you make. Both the rich man and the poor man pay an extra 10.75%. When you bought your fishing license this year, did they ask if you fished from the bank?, from a jon boat? or from a 21ft Allison with a merc 275? No, the fee was $22. When someone gets pulled over for speeding is the ticket more if the driver is in a Lexus or a Dodge Neon? Nope, its the same for both. The same applies to SS and Medicare, both around 15% for the burger flipper on up the pay scale. So when you look at it that way (realistically) It becomes plain to see (at least for me) that the rich man spends less of his wealth on taxes and fees than the poor man. It's called math! Don't take my word for it..... Listen to what Warren Buffett, the 3rd richest man in America has to say about tax rates and the rich.
http://www.youtube.com/watch?v=Cu5B-2LoC4s

Yes I understand mostly from my Economics degree I have from the University of Georgia that sales taxes and sin taxes are regressive by definition. I am all for doing away with most of them. Especially the 160% increase in tobacco tax that your President Obama signed into law during his first month. As I have said before it disproportionately affected the poor 27 times more than an increase in income taxes would have. I am for sun setting the current SS and Medicare taxes because it is at best a national ponzi scheme. I would much rather keep my money and invest it the way I want to instead of giving it to the government to waste. Here is some math for you. Who do you think pays more in real dollars the man that buys the Lexus or the man that buys the Dodge Neon. While they may pay the same % rate the rich man with the Lexus pays more money because the Lexus is obviously priced higher. So we could make the assumption that wealthier people probably consume more dollar wise than the poor. I can't explain it in any more elementary terms than that hope you get it. Yes I am familiar with Buffets secratary paying a higher percentage than he did but she didn't donate millions to charity to reduce her taxable income.


Your right, I don't have an Economics degree, but I do have a Business degree from FSU. I also understand 5th grade mathematics. The whole point of my posts was demonstrate my belief that fairness in our entire tax structure should not be measured by total money collected, but by what percentage each of us is capable of paying. I'll try to make the case once more. I'm sure you will strongly disagree but here goes. I'll tell you a fishin story.

A father and son love to fish. This season was the son's first year that he was required by law to pay a license fee to the State if he wanted to go fishing legally. He mowed a neighbor's yard, and earned 15$, less than minimum wage, but that's ok. That was all he could earned that week with his lack of education, experience and job skills, after all he's just a kid. The dad made 800$ that week at his job. They went together to the tackle store to purchase their fishing licenses. The kids fishing license cost 8$, dad's license costs 22$. The kid's license took 53.3% of his weekly income. Dads license took only 3.8% of his weekly income. Dad also had 28% of his check withheld for income taxes, making his weekly tax bill 31.8%. Dad paid almost 3 times as much for his license than the son did for his license. Dad had 224$ taken out of his check right off the top, and the son had 0$ taken from his weekly pay. Still, the son paid 21.5% more of his weekly income in taxes/fees than dad did, and only paid one form of taxes. Plus the son now only has 7$ left, just enough to buy 2 crankbaits. Dad has $554 dollars left over, enough to buy crankbaits, packs of worms, weights, hooks, spinnerbaits and jigs. Who's tackle box is filled up now, the dad's or the son's? The son better hope the crankbait bite is on tomorrow, and will be reluctant to cast into heavy cover since he only has two baits. Who paid more for their fishing license the dad or the son? A Libertarian/Republican would tell you that dad paid more. A Democrat would tell you the son paid more.

That's why it's fair to have a progressive income tax structure with the ones who can best afford it to pay the most. So, I don't wanna hear about the son needing to work harder. All of us can't be rich. Who would mow the neighbor's yard?
 
outcaster - 7/27/2010 6:57 PM

cheez - 7/27/2010 2:21 PM

outcaster - 7/27/2010 1:43 PM
Listen to what Warren Buffett, the 3rd richest man in America has to say about tax rates and the rich.
http://www.youtube.com/watch?v=Cu5B-2LoC4s

Wow! I had no idea Warren Buffett was the third richest man in America.
How could this possibly be? Warren Buffett is a democrat. I have heard and read that all rich people were Republicans. Something is just not right here.

Came as quite a shock to me too! Turns out though, after a little research I learned that..... some Democrats are wealthy, some own a firearm and hunt and fish, some are veterans, some have a job and pay taxes, some have never actually been on Welfare, some even marry someone from the opposite sex, and some have been to church. ;)

SOME is the key word. Most definitely the exception rather than the rule. I figure they just have not been to enough democratic political rallies.
 
cheez - 7/27/2010 9:38 PM

outcaster - 7/27/2010 6:57 PM

cheez - 7/27/2010 2:21 PM

outcaster - 7/27/2010 1:43 PM
Listen to what Warren Buffett, the 3rd richest man in America has to say about tax rates and the rich.
http://www.youtube.com/watch?v=Cu5B-2LoC4s

Wow! I had no idea Warren Buffett was the third richest man in America.
How could this possibly be? Warren Buffett is a democrat. I have heard and read that all rich people were Republicans. Something is just not right here.

Came as quite a shock to me too! Turns out though, after a little research I learned that..... some Democrats are wealthy, some own a firearm and hunt and fish, some are veterans, some have a job and pay taxes, some have never actually been on Welfare, some even marry someone from the opposite sex, and some have been to church. ;)

SOME is the key word. Most definitely the exception rather than the rule. I figure they just have not been to enough democratic political rallies.

We're not very organized either. The only time we get to be in charge is when the Republicans screw up so bad no one will vote for them. Hey, next time your side gets into power don't screw up so bad and Democrats can go back to being just whiny liberals. lol
 
"Who paid more for their fishing license the dad or the son? A Libertarian/Republican would tell you that dad paid more. A Democrat would tell you the son paid more."

I would say the father then would probably loan some of his lures to the son to use. Call it trickle down economics or charity. See Conservatives by far give more to charity than Liberals they just don't like forced charity.
 
Please look back to my post, I have a B.B.A. in management, which means that I took both economics and politcial science classes, most of which were taught by democrats! The bottom line is the American way, "You are the only one that can change the stars!"
 
I've posted this barstool economics a couple of times before. Sure, the rich guy is paying a lower percentage of his income. I just don't ever recall reading anywhere that America was all about keeping people down. Who is stopping the bottom 9 guys from going out and earning more. America is the land of equal opportunity, not equal pay. No one is stopping me from inventing the next great computer operating system or widget that will make me a billion dollars. And if we went to a national sales tax type of program, again the rich would be paying a whole lot more than other people, but yes, it would still be a smaller percentage of their total income. Then they could hire some of the people in the lower income brackets to work for them. Keep increasing the percentage and they will continue to find more and better ways to hide their income.

One of the reasons a lot of really rich people don't pay tons in taxes is that they actually own very little themselves. The difference is that the control the use of those things....cars, homes, etc can be bought under corporations etc.
 
Sorry Danny, but I just have to ask.

If I've got this right, you honestly believe that more of dad's money should be taken from him so that he doesn't have more lures in his tackle box than his son? Or is it that you want him to pay 21.5% more of his weekly check for exactly the same fishing privilege? Even at that he would still have the full tackle box.

Remember the boy spent only part of one day working, and there is no allowance made here for who had to do what to earn the money - how much investment did it take to realize the return, and who took what risks to try to earn more, and how much time and effort did it take to make that paycheck? Who paid for the lawnmower and gas? To supply him with medical insurance that he cannot afford by himself?

If two folks each get caught with too many fish, should one pay a higher fine because he has more money? Or go to jail for a longer period?

To be honest, I wish you'd define just who the "rich" are. Was it me when I owned my own business and worked 12 to 14 hour days, 6 days a week? Did it make any difference that I took everything I had (and could borrow) and bought machinery and materials to try to make more than my previous, but safe, hourly wage? That I lived in an 18 foot travel trailer behind the shop? Or was it me - when after a number of years - it finally started to yield a great return for my risk and investment? You really need to define "rich" before you try to take a higher percentage of someone's money. It is only a relative term.

And now that my tackle box is full of lures, I've changed to mostly catfishin'...................... emoDoh
 
EricM - 7/27/2010 11:03 PM

Sorry Danny, but I just have to ask.

If I've got this right, you honestly believe that more of dad's money should be taken from him so that he doesn't have more lures in his tackle box than his son? Or is it that you want him to pay 21.5% more of his weekly check for exactly the same fishing privilege? Even at that he would still have the full tackle box.

Remember the boy spent only part of one day working, and there is no allowance made here for who had to do what to earn the money - how much investment did it take to realize the return, and who took what risks to try to earn more, and how much time and effort did it take to make that paycheck? Who paid for the lawnmower and gas? To supply him with medical insurance that he cannot afford by himself?

If two folks each get caught with too many fish, should one pay a higher fine because he has more money? Or go to jail for a longer period?

To be honest, I wish you'd define just who the "rich" are. Was it me when I owned my own business and worked 12 to 14 hour days, 6 days a week? Did it make any difference that I took everything I had (and could borrow) and bought machinery and materials to try to make more than my previous, but safe, hourly wage? That I lived in an 18 foot travel trailer behind the shop? Or was it me - when after a number of years - it finally started to yield a great return for my risk and investment? You really need to define "rich" before you try to take a higher percentage of someone's money. It is only a relative term.

And now that my tackle box is full of lures, I've changed to mostly catfishin'...................... emoDoh

Eric, the point of the story was to demonstrate that even though the rich guy (dad) paid more actual dollars for his license, it was a much much smaller portion of his income. Most taxes and fees are paid equally by percentages by the rich and poor alike, which in-turn causes the poor group to pay higher percentage of it's income in taxes/fees. Things like sales tax, fuel taxes, property taxes, sewer fees, tobacco, and alcohol taxes, fishing licenses, car tags, and boat registrations. The progressive income tax system levels that somewhat. Correct me if I'm wrong, but when the decade of the 90's ended the tax rates were higher, the rich were still rich, and the gov't took in more money than it spent. Since then the taxes were cut, with the largest cut to the top 3%. Then the surplus turned into a deficit, wall street collapses, and un-employment rises. It didn't work out very well. I liked the 90's way a lot better. Some have advocated for a consumption tax, others for a flat tax. Neither meets the standard of being fair to all and raises the proper amount of money. If someone can come up with an alternative "Fair to all" tax structure that raises the money needed I'm all ears. Should all of us just chip in 3 grand every year? That would be fair, right? All of us paying in the same amount in. Would that raise enough to pay for the things we want the gov't to do for us? How much should each of us chip in?

As for who's rich... the gov't defines it as someone reporting an adjusted gross income of a quarter million dollars per year. That's 3% of us.
 
Dany, let's just be straight up about this. There is no "Fair tax to all". Period. How can it be fair to make someone with little income even pay a smaller percentage than one with more? He still has less at the end to pay living expenses. How is it fair to make someone with more pay more for exactly the same services recieved? How is it fair to tax a child and an adult different amounts for the same fishing privilege? It just doesn't work out as "fair" no matter how you force people to pay taxes (fees, etc, etc.).

Although we all generally use the common services and infrastructure about equally, we have settled with the reality that not all can pay for it equally, and therefore have made adjustments that wrongly, but necessarily, make those with more pay a larger portion so that all can benefit. Do those who have no children pay less because they don't use the schools? Not fair, but it pretty much has to work this way. Does a man with a bigger house use the street system more? Nope, but he pays more tax toward it because his property is worth more. Again, not fair, but we have to pay for the repairs of the street if we wish to continue to use it. I know everyone gets the point.

My opinion on tax plans? I have read and believe that the "Fair Tax" plan is actually a reasonably equitable way to go. It will kill most of the tax avoidance and tax evasion that is going on now, and those who spend the most will pay the most (they had the most to spend). I encourage people to read it and not just form opinions on the half-truths (or less) that most politics generate. Again, just my thoughts on the tax structure.

Where the different political groups, well, in fact where pretty much every individual differs, is in what we think is "necessary" and what people should be forced to pay for, and in how much "unfairness" is going to be necessary to make that payment. Today's version of "necessary" has us with a hugely bloated government running all kinds of programs - right or wrong.

One thing needs to be absolutely clear to all of us if we want to survive. We cannot spend more than we take in. Period. We must limit our government - meaning us - from borrowing against the future. Is has to stop and it has to be corrected. If the funds aren't there, then the project doesn't happen now. We have been betting that the future increase in population and wealth will pay for what we think we just must have today. This is just a Ponzi scheme, and that's illegal everywhere but in government. It doesn't work and will collapse.

And our country, and probably the entire world economy, will collapse with it. We've seen just a tiny hint of it in the last couple of years.

It will be a lot easier for us to argue who pays what when we can actually pay it.
 

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