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Tax Cuts

Discussion in 'General Discussion Forum' started by clontaago, Jun 15, 2005.

  1. clontaago

    clontaago Well-Known Member

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    Put together by an Econ Professor in U of NSW....Compulsory Reading

    The latest tax cuts explained

    2005 Budget


    Here is the real story to lighten the Budget discussion! You've heard
    the cry in the last couple of weeks from across Australia: "It's just a
    tax cut for the rich!", and it is accepted as fact. But what does that
    really mean?

    The following explanation may help.

    Suppose that every night, 10 men go out for dinner at a restaurant.
    The bill for all 10 comes to $100.They decided to pay their bill the
    way we pay our taxes, and it went like this:

    * The first four men (the poorest) paid nothing.
    * The fifth paid $1.
    * The sixth $3.
    * The seventh $7.
    * The eighth $12.
    * The ninth $18.
    * The tenth man (the richest) paid $59.

    All 10 were quite happy with the arrangement, until one day, the owner
    said: "Since you are all such good customers, I'm going to reduce the
    cost of your daily meal by $20."

    So now dinner for the 10 only cost $80. The group still wanted to pay
    their bill the way we pay our taxes. The first four men were
    unaffected. They would still eat for free. But how should the other
    six, the paying customers, divvy up the $20 windfall so that everyone
    would get his "fair share"?

    They realised that $20 divided by six is $3.33. But if they subtracted
    that from everybody's share, then the fifth and sixth men would each end
    up being paid to eat. The restaurateur suggested reducing each man's
    bill by roughly the same percentage, thus:

    * The fifth man paid nothing (like the first four) instead of $1
    (100%saving).
    * The sixth paid $2 instead of $3 (33% saving).
    * The seventh paid $5 instead of $7 (28% saving).
    * The eighth paid $9 instead of $12 (25% saving).
    * The ninth paid $14 instead of $18 (22% saving).
    * The tenth paid $49 instead of $59 (16% saving).

    Each of the six was better off, and the first four continued to eat for
    free, as now did the fifth - but 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!"

    "That's right," exclaimed the fifth man. "I only saved a dollar too.
    It's unfair that he got ten times more than me!"

    "That's true!" shouted the seventh man. "Why should he get $10 back
    when I got only $2? 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 dinner. The nine sat down and ate without
    him, but when they came to pay the bill, they discovered that they
    didn't have enough money between all of them to meet even half of the
    bill!

    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.

    There are lots of good restaurants in Monaco and the Caribbean.

    David R. Kamerschen, Professor of Economics, University of NSW.
     
  2. Dan

    Dan Administrator Staff Member Administrator 2016 Tipping Competitor

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    Obviously a rich professor.

    What he failed to mention is
    1 - If the rich man did go to monaco, they would need to stop trading in australia and find a resident of monaco to "own" the business
    2 - If the rich went, they would be replaced by other people with money and so on. Only if the economy falls over will it be a problem.

    And I am all for beating people because they are rich until i become rich
     
  3. ManlyBacker

    ManlyBacker Winging it Staff Member

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    The first 4 were beaten up by the door gorilla before they got into the restaurant 'cos their clothes and haircuts weren't snappy enough. The dined on the contents of the garbage bin out the back. The 9th and 10th didn't pay anything as their wallets were based in the Cayman Islands. All the rest paid for everything that everyone enjoys. They all left early so they could get up at 5.00 am and keep the cycle going. The restaurant owner (the tax creator in this analogy) was last seen opening up a string of restaurants to rake in even more money.
     

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