Wednesday, August 22, 2012

Our Progressive Tax Structure Simplified – Now let’s go Share a Snack Together!

Suppose that every day, ten co-workers go out for snacks 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 co-workers snacked together every day and seemed quite happy with the agreement, until one day, the shop owner gave them a new proposition.

“Since you are all such good customers,” he said, “I’m going to reduce the cost of your daily snacks by $20″. Snacks for the ten men would now cost just $80.

The group still wanted to pay their bill the way we pay our taxes. So the first four co-workers were not affected. They would still eat for free. But what about the other six co-workers? How could they divide the $20 SAVINGS so that everyone would get his or her fair share?

The shop owner suggested that it would be most fair to reduce each man’s bill by a higher percentage the poorer he was, to follow the principle of the tax system they had been using, and he proceeded to work out the amounts he suggested that each should now pay.
  • And so the fifth man, like the first four, now paid nothing (100% saving).
  • The sixth now paid $2 instead of $3 (33% saving).
  • The seventh now paid $5 instead of $7 (28% saving).
  • The eighth now paid $9 instead of $12 (25% saving).
  • The ninth now paid $14 instead of $18 (22% saving).
  • The tenth now paid $49 instead of $59 (16% saving).
Each of the six co-workers was better off than before. Remember the first four continued to eat for free. But, once outside the shop, the co-workers began to compare their savings with one another.

“I only got a dollar out of the $20 saving,” declared the sixth co-worker. He pointed to the tenth co-worker, “but he got $10!”

“Yeah, that’s right,” exclaimed the fifth co-worker. “I only saved a dollar too. It’s unfair that he got ten times more benefit than me!”

“That’s true!” shouted the seventh co-worker. “Why should he get $10 back, when I got only $2? The wealthy get all the breaks!”

“Wait a minute,” yelled the first four co-workers in unison, “we didn’t get anything at all. This new tax system exploits the poor!” We get treated the worst!

The nine co-workers surrounded the tenth and verbally abused him so badly he got very upset and vowed to never again to see them and even quit his job.

The next night the tenth co-worker OBVIOUSLY didn’t show up for snacks so the nine sat down and had their snacks 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, men and women, liberal and conservative, rich and poor and the intelligent and the economically illiterate, is EXACTLY how our tax system ACTUALLY works. The people who already pay the highest taxes will naturally get the most benefit from a tax reduction. HOWEVER they are already paying the Lion share; and they will STILL BE PAYING THE LIONS SHARE after a tax reduction.

The top 1% of earners pay 40% or more of all Federal Income taxes. Now they don’t mind paying their fair share and the 50% who pay no federal income taxes SHARE as well. But don’t verbally abuse them and tell them somehow they are the PROBLEM.  Tax them too much, attack them for being wealthy, and disrespect them and they just may not show up anymore or may give more money to charities and lower their tax burden even further. In fact, they might start eating snacks overseas, where the atmosphere is somewhat friendlier.

Now... Do we really need to be raising taxes?

Here is a visual that quite clearly shows how badly progressive our tax structure is.
We are the United States of America - yet our tax structure has now become just as progressive as the average European nation - which is part of our problem.

Please share this on your wall and with your friends so they can understand how the economy they live in really works and who to vote for in 2012 election.

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