What’s wrong with the Liberals’ view on taxes? What’s wrong with their constant vow to tax the ‘rich’? What’s inherently wrong with their proclaimed intent to ‘level’ the playing field? Here’s a simple, logical example that any open minded individual can understand explaining the fallacy behind ‘taxing the rich’.
Suppose that every day, ten men go out to eat. The bill for all ten is $100. If they paid their bill the way we currently pay our taxes, it would go something like this:
The first four men (the poorest) would pay nothing.
The fifth man would pay $1.
The sixth man would pay $3.
The seventh man would pay $7.
The eighth man would pay $12.
The ninth man would pay $18.
The tenth man (the richest) would pay $59.
This seems like a good plan so it’s what they decide to do. The ten men eat at the same place every day and are quite happy with the arrangement until one day, the owner throws them a curve. “Since you are all such good customers I’m going to reduce the cost of your meal by $20.” The meal for the ten men is now only $80. The group still wants to pay their bill the way we pay our taxes so the first four men are unaffected by the change. They will still eat for free. But what about the other six men – the paying customers? How could they divide up the savings so that everyone would get their ‘fair share’?
They realize that $20 divided by six is $3.33. But, if they subtract that from everybody’s share, then the fifth and the sixth man would each end up being paid to eat as they were only paying $1, and $3. So, the owner suggests that it would be fair to reduce each man’s bill by roughly the same amount or a percentage of the savings which he proceeds to do and it works out like this:
The first four men (the poorest) again pay nothing.
The fifth man now pays nothing (100% savings).
The sixth man now pays $2 instead of $3 (33% savings).
The seventh man now pays $5 instead of $7 (28% savings).
The eighth man now pays $9 instead of $12 (25% savings).
The ninth man now pays $14 instead of $18 (22% savings).
The tenth man now pays $49 instead of $59 (16% savings).
The first four still eat for free and the remaining six are better off than they were before. But, once they leave the restaurant the men begin to compare their savings. “Hey, I only got $1 out the $20 discount” declares the sixth man. He points to the tenth man and says “but he got $10!”. “Yeah, that’s right,” exclaims the fifth man. “I only got $1 too. It’s unfair that he got ten times more than I did.” “That’s true!!” shouted the seventh man. “Why should he get $10 back when I only got $2? The wealthy always get all the breaks!” “Wait a minute,” yelled the first four men, “We didn’t get anything. The system always exploits the poor!”
So, the nine men surround the tenth man and beat him up. The next day the tenth man doesn’t show up to eat, so the nine men sit down and have a big meal without him. However, when it came time to pay the $80 bill, guess what? The nine men discovered something very important. Without the tenth man (the richest) they don’t have enough money to pay even half the bill. And, that, boys and girls, is how tax system works. In spite of the Liberal mantra of ‘tax the rich, tax the rich’, the people who pay the highest taxes logically get the most benefit from any tax reduction. Those that pay nothing or very little receive little or no benefit. Common sense! Tax the ‘rich’ too much, attack them for being wealthy, accuse them too much and they may not show up to play the stupid game anymore. In fact, they may just starting eating in a restaurant overseas where the atmosphere is somewhat friendlier. Makes sense to me!
What's missing from your story is that while the men might work more or less the same amount, the tenth man earns $5 million a year while the other 7 or so earn less than $50,000 a year. So, if he has to pay more for a sandwich, he might be willing to do so because he can live in a country where he earns $5 million a year and not live in constant fear for his own life.
The key words in your statement is "willing" he gets to choose. Government on the other hand is force, it is the abscence of free will and is therefore evil.
I agree with the poster above. Eliminate income taxes, death taxes, and taxes on savings and investment and tax consumption. That is the fairest possible system!
If there is no government, who does the taxing?
Every man for himself in that scenario. Who pays the cops?
People with Horse Shoes tattoo'd on the side of their heads.
No, willing is appropriate. Otherwise, he would move to another country with "fairer" tax laws. I'm sure with several million in the bank, Andorra, Lichtenstein, Monaco, Grand Caymans, etc would be happy to take him and not tax him.
That's an old meme. It is just as easy to copy-paste the rebuttal as it is to copy-paste the original argument:
Here's what it looks like with some additional relevant information, specifically the men's income and total cost of beer relative to their income:
The first 4 men make $8 a day and their beer costs them $0.80 a day. They still have $7.20 in their wallet afterward (90% of their income).
The fifth man makes $32.55 a day and his beer costs $4.48 a day. He still has $28.07 in his wallet (86.2% of his income).
The sixth makes $78.85 a day and his beer costs $16.06 a day. He still has $62.79 in his wallet (79.6% of his income).
The seventh makes $164.55 a day and his beer costs $40.05. He still has $124.50 in his wallet (75.7% of his income).
The eighth makes $357.70 per day and his beer costs $103.79. He still has $253.91 in his wallet (71% of his income).
The ninth makes $800 per day and his beer costs $258.60. He still has $541.40 in his wallet (67.7% of his income).
The tenth man makes $5,000.00 per day and his beer costs him $1,728.60. He still has $3,271.40 in his wallet (65.4% of his income).
Overall, the bartender makes $2154.78 each day.
So, one way to look at it is "The first four men only paid 80 cents for their beer while the tenth man paid over $1700 for his beer. That's completely unfair!"
Another way to look at it is "At the end of the day, the first four men only have $7.20 left in their wallet but the tenth man has nearly $3300 left in his wallet. Even though the tenth man is paying a lot more for his beer, his wallet is still awfully fat when he leaves the bar."
I think the most interesting thing though is the plight of the guys in the middle, specifically the sixth man. Everyone is paying roughly 4% more of his total income than the previous guy except for the sixth man, who is paying nearly 7% more than the fifth man.
So let's adjust the numbers again and make everyone pay 4% more than the guy in front of them, except for the 9th and 10th men who will pick up the burden of paying 7% and 9% more than the 8th man, respectively (in other words, let's simulate a rough version of Obama's tax plan):
The first 4 men make $8 per day and their beer still costs them $0.80 per day. They still have $7.20 in their wallet afterward (90% of their income).
The fifth man makes $32.55/day and his beer costs $4.56/day. He still has $27.99 in his wallet (86% of his income).
The sixth man makes $78.85/day and his beer costs $14.19/day. He still has $64.66 in his wallet (82% of his income).
The seventh man makes $164.55/day and his beer costs $36.20/day. He still has $128.35 in his wallet (78% of his income).
The eighth man makes $357.70/day and his beer costs $93/day. He still has $264.70 in his wallet (74% of his income).
The ninth man makes $800/day and his beer costs $264/day. He still has $536 in his wallet (67% of his income)
The tenth man makes $5,000/day and his beer costs $1750/day. He still has $3,250 in his wallet (65% of his income).
Overall the bartender makes $2165.15 each day.
So what did we learn from this exercise? The first 5 men (i.e the lower classes) pay pretty close to exactly what they were paying before. The sixth, seventh, and eighth men (i.e. the middle and upper-middle classes) all pay between 9.6% and 11.6% LESS than they did before. Only the 9th (i.e. rich) and 10th (i.e. ultra-rich) are paying more than they were before and they are only paying 2.1% and 1.2% more, respectively. Also notice that the bartender (i.e. the Federal Government) is making half of a percent more than he did before!
By the way, translated into real dollars, the ninth man makes $800,000 a year, the tenth man makes $5,000,000 a year. Just move the decimal place three spaces to the right to see how actual income matches up. How many people do you know who would qualify as an eighth, ninth, or tenth man? How many of them seem on the brink of insolvency due to the progressive tax system? Conversely, how many of you are fifth, sixth, or seventh men (i.e. make between $32,550/year and $357,699/year)? How well are you making ends meet in today's economy?
Interesting explaination, now try defending it. LOL, it's too logical.
No, it doesn't make sense because.. Since they have no jacket, tie, and probably no shoes either, the first four men would not be allowed in the restaurant with the other six men to begin with; the tenth man, and probably the ninth as well, would never agree to eat with the others in the first place.
I think we working poor have carried this country on our backs long enough
The only equitable solution is to impose consumption taxes and eliminate income taxes. Consumption taxes tax only when one chooses to spend.
The idea of taxing the rich is just another way to distract from the real issues.
If a person makes $100,000 a year they will pay on average $23,000 in tax. The person who makes $23,000 a year pays about $3,450... so in actual dollar amounts the guy making $100,000 is paying the equivalent of 7 poor people.
Does the wealthy person receive 7x the benefits? Poor people use a lot of subsidized services.
I am not for penalizing success just because you can.
By taxing consumption you give people the option to save or spend, to invest or to consume.
We do not need more taxes. What we need is fiscal responsibility. When times are bad the Government keeps on spending while citizens cut back. Congress gave themeselves a 6% raise this year. They jumped all over the Auto companies for flying private jets then went out and purchased 6 Brand New jets for their own use... under the guise they are for military use. Every time legislation is passed it is packed full of pork projects.
If you want to level the playing field eliminate regressive taxes all together. Eliminate the Federal Reserve/Central Bank which controls the money supply and dictates policy.
I am astounded that people have no idea how the Federal Reserve works and each time there is bad enconomic news they place blame on the rich or a political party or some other cause.
The cause of the recession is Federal Reserve Policy. When the Government wants money they create treasury bills, then they sell those T bills to the Federal Reserve. And guess what? Those T bills have an interest rate attached to them. And who gets the interest? The people who own the Federal Reserve. And the owners are private bankers NOT American Citizens.
So each time Uncle Obama prints more money you have more debt to pay back. Kind of makes you wish you were one of those private bankers doesn't it!
Now think about that. Money automatically printed feeds mandatory interest payments to the people that own the Federal Reserve.
There is so much debt right now that is will NEVER be possible to pay it all back.
So taxes are not the issue. Federal Reserve Policy is the issue.
The Federal Reserve must be abolished. Our money isn't REAL... there are only $3 of hard currency in cirulation for every $100 of electronic currency. Your money is worth nothing.
Times are not going to get better... they are going to get worse.
Every argument for the Central Bank/Federal Reserve has collapsed. The Fed has never stopped a recession because it creates them.
Government Spending is out of control. You can not pay debt with debt - the model is unsustainable.
So educate yourself about Monetary Policy and stop playing party politics.
"If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them, will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered."
- Thomas Jefferson
Sounds like a great idea for a book.
I'll call it "Tobey Shrugged".
How about taxing the "super-rich" at a rate of 10%, and abolishing taxes for anyone making less than 50 000 a year. So, If you make five million dollars a year, you get to keep 4.5 million dollars of it... a year! How's about that?
It will all be taken care of through the magic of the "trickle down" effect.
I saw a caption to this same picture on Digg recently:
"Looking down, you see nothing but s***. Looking up, you see nothing but ***holes."
Love this photo!!!!!! So much truth in that pic. Thanks for sharing this one.
It doesn't matter how much we tax the rich because it all goes back to the rich anyway. They're the first to cry about paying taxes, the first to ask for bailouts when they screw everything up and they're the last to keep American jobs in America. Also, it's not like the poor or the working class have the ear of their elected officials, either. As with any so-called free market system, the price should fit the service. If the rich are going to coerce our gov't and therefore our enlisted men into going to war so they can get lucrative defense contracts, then you damn well better believe they should pay for it too!
Nice one, Jonathan. Thank you for adding the reality and complexity of the human condition and not entertain simplistic fables any further.
We've made this system, as American citizens-- and the people can very well undo it. It starts with the individual waking up.
This is a spot on observation and yes we need to get the whole country involved. The rich make it our business to do the things that profit them and throw us to the side when it is not profitable for them.
In response to the OP: Aside from the fact that your whole premise is flawed, there's one particular bit of your conclusion that no one's picked up on yet:
"In spite of the Liberal mantra of ‘tax the rich, tax the rich’, the people who pay the highest taxes logically get the most benefit from any tax reduction. Those that pay nothing or very little receive little or no benefit."
My issue is that "the people who pay the highest taxes logically get the most benefit from any tax reduction" is a clearly false statement. Who benefits from a tax reduction is dependent on to whom the reduction is given, i.e. if the tax rates of the lowest brackets are lowered, the poor benefit, if the that of the highest bracket, the rich.
Next, MikeNV: Again, I really take issue with most of your post, but particularly the following. First:
"Does the wealthy person receive 7x the benefits? Poor people use a lot of subsidized services.
I am not for penalizing success just because you can."
Without bringing in any of the good sound arguments about relative wealth etc. in favor of a progressive tax system, I'll take a different tack: Would I be correct in assuming that you consider one of the primary responsibilities of the government to protect the right of property and the sanctity of contracts? If so, I can only assume that you would agree that it is the rich in fact who are deriving the most benefit. See, the rich, having more property and being more involved in all sorts of lucrative contracts, benefit from the government to an extent far above and beyond the poor, who can merely hope for the meager social services currently provided.
"Our money isn't REAL... there are only $3 of hard currency in cirulation for every $100 of electronic currency. Your money is worth nothing."
You realize that money is never "REAL" right? Money is only ever worth anything because we agree that it is worth something. Backing it with gold is ridiculous upon taking the moment's consideration that gold is, in fact, worth almost nothing either, it just looks pretty. Perhaps backing currency with something actually valuable, aka land, would be an improvement, but I don't particularly see how. Money is "REAL" because we say it is and it is worth what it is worth because that's what we agree it is worth.
Yes, in point of fact, they do. Now, they may not pay income taxes (depending on your definition of poor, but I'm pretty sure most definitions would include people with an income such that they pay taxes) however, they do pay sales tax, among other taxes (sales taxes likely being the most burdensome). Fun fact, by the by, the sales tax is regressive.
Of course, I had originally included none of that explanation because I had been working under the apparently flawed assumption that people would realize that I was talking about brackets in which, you know, taxes were actually payed. It seems I was mistaken.
And what did you mean when you said "tax brackets"? Is there a "bracket" for sales tax? Come on...
This is such a fun game: I get to write out a well thought out, intelligent reply and you get to pick one aspect of it and harp ineffectually on it. Such fun! But I think I have a better idea for a game, how about this: I write the aforemetioned reply and someone (it doesn't even have to be you) makes a substantive response to it (substantive hear referring to more than just length). How does that sound? Personally, I think it would be much more fun. Also a more legitimate enterprise for all involved.
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