This is an oldie, but goodie for those of you that haven't seen it before:
EDIT: the source of the below is unknown.
Suppose that every day, ten men 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 men -- 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 man -- the richest -- would pay $59.
That's what they decided to do.
The ten men 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 men 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 men 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 end up being paid to eat their meal.
So the restaurant 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 paid nothing, the sixth pitched in $2, the seventh paid $5, the eighth paid $9, the ninth paid $12, leaving the tenth man with a bill of $52 instead of his earlier $59.
Each of the six was better off than before.
And the first four continued to eat 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. "But he got $7!"
"Yeah, that's right," exclaimed the fifth man.
"I only saved a dollar, too.
It's unfair that he got seven times more than me!"
"That's true!" shouted the seventh man.
"Why should he get $7 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 he 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 were $52 short!
And that, boys and girls, journalists and college instructors, is how the 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.
Unfortunately, some cannot grasp this straight-forward logic!
..................
Screw that, why am I letting the first 4 people to eat for free. Let them wash dishes in the kitchen if they want to eat. Oh you're only paying $3 well you can wait at the street corner for your chicken and rice. Also why am I eating with schmucks who are only paying $7 and $12. I'll just leave and head uptown to eat over at NoBu with other customers who can afford $59 Shiromi Usuzukuri and Chilean Seabass.
The tax system is fucked up, but that anecdote is an equally fucked up misrepresentation of the tax system by overly simplifying and/or omitting key aspects.
Nice post, but too over-simplified to get the point across.
It doesn't over simplify anything. Half this country enjoys being an American without paying any Federal income tax. And on top of that they complain about it.
correct. it is truly scary the percentage of people with an effective tax rate of 0. Even better, a negative tax rate (due to payouts)...
Where can you find these stats?
DISCLAIMER: I'm republican/libertarian and I hate social security, sorta disagree with medicore/medicaid, and hate the amount given to food stamps...
...but this article and TNA's assertion is ridiculous. From the article in this thread...
So yah, old people/young people and people who can't find a job. So what do you do with those losers who can't find a job...kick them out of America? Would that be equal? Jeez...finance people are smart, but sometimes threads like this make me question that.
Also, note a lot of the lack for federal taxes come from deductions which are taken advantage of by the middle class/up.
OR
OR
OR
I said half do not pay Federal Tax. Period. No OR. If you work you pay payroll tax. I am talking about Federal Income tax.
http://blog.heritage.org/wp-content/uploads/CDA-2012-index-dependence-g…
I realize this is from a conservative site, but the source the data from the IRS.
The only "fair" tax system I know of is a consumption tax or VAT, with a small prebate to limit taxation of the poor. Stimulates investment, minimizes enforcement costs, remains somewhat progressive, and is entirely transparent. Most importantly, it doesn't distort the market.
Yeah. IRS posts the data also. Now I don't really care, nor do I want households making $50K or less to pay Federal Taxes. But it irritates and insults me that those who pay nothing complain about what others pay.
Is WSOASIS really this idiotic? This is something I'd send to Tea Party redneck idiots to gather their support for right-wing tax policy. But aren't we a little too smart for this?
Just look at the numbers in that "joke story". Using MS Calculator for 60 seconds- we can find that the decrease in "taxes" before and after was (for #5through 7): 100%, 33%, 29%, 25%, 33%, and only 11.8% for the richest. INSANELY progressive. More progressive/liberal than could ever get through our congress. This will NEVER, I repeat NEVER exist.
In this joke story, these people seem too stupid to understand the difference between % and absolute terms. Hence their anger. Nobody is that stupid. (Oh wait, I stand corrected).
The bush tax cuts for a representative 1M income decreased the total tax rate (marginal rate for each bracket averaged) from 36% to 32% (source: Forbes). Do you really think titans of industry are going to abandon everything (including liquidating their businesses) and run away over 4 percentage points? and if so, where to? Every developed country save Saudi Arabia has higher top bracket rates.
FORGET the position of the successful should keep their spoils and the poor are jealous- that's a flawed campaign. The way to get right-wing tax policy is through advocating supply-side tax cuts for job creators. That is much harder to prove otherwise due to the continuous nature of economic data and the difficulty of parsing out causes and effects.
Fact - Half this country enjoys the benefits of being an American while not paying into the Federal system through Federal income tax.
Fact- The top 10% pay the bulk of the taxes
Fact - The only way a rich person pays a lower % than a middle class person is through a blended rate or deductions, which government has put in place to incentivize people.
Oh I love the petty little dig at the Tea Party. Sorry if increased freedom, less government and people keeping more of what they rightfully earn is a redneck idea.
Taxes should always go down. We should be fighting with each other on how much to cut, not how little. Shut down whole cabinets. Dept of Education, gone. Dept of Energy, gone. Dept of Homeland Security, gone. IRS tax code, simplify. Tax income and no deductions. No child tax credit, no mortgage interest deduction, no Chevy Volt credit, no oil or ethanol credit.
People have a fundamental RIGHT to what they own and earn. Property rights are paramount.
@TNA None of what you posted is relevant to what I've said. And I have not previously disagreed with anything you have said in this latest post.
Nevertheless, I'm going to be a retard and spend my vacation time "responding" to you:
Fact 1: True. 42% from my source. According to a NYT referencing statics from the Tax Policy Center (Both GOP and Dem leadership have conceded that it is nonpartisan), of that 42%-- 55% of those people have a household income under $16,182, a further 30% have a household income under $33,542. So 85% of those paying no income tax appear to be very poor.
You might think to yourself "thats not a lot- but I could live on that and still pay fed taxes!!!"- well consider that there are multiple people supported by those meager household incomes (poor people live in large households).
Are there people who pay no income taxes that AREN'T poor? Yes, almost 0.8% of those paying no fed income tax actually have an income that is $103,465 or ABOVE- this is typically people who only owed capital gains that they avoided in some way.
It appears to me that there are some people that could probably be paying something, say 10%. (though I assume you don't want to go after that 0.8% figure and ruin capital gains advantages for you or me). However, for the majority of these people- you need to SHUT THE FUCK UP. They're typically desolate with children that will never have the opportunity to climb up (just getting a HS diploma is a dream). Taxing them would be a HUGE burden on them and generate VERY LITTLE for us. Ditto for the the unemployed, homeless, imprisoned, institutionalized, disabled, etc.
Fact 2: I don't dispute that either. Do you know what income is required to be in the top 10% of income earners? Just $80k. So naturally, if you put everyone who makes $80k or more in a group, that group will be taking in the vast majority of the total income- and thus, also, be paying the majority of the total federal income tax.
Fact 3: Be specific. Though I doubt you can.
As for your little diatribe of taxes should always go down- the US already takes in absurdly low rates of taxation when compared to similar economies. (even their corporate tax rates- which may appear mid/high- are strikingly lower than nearly everywhere else in the world if you consider the effective rate). And as for deleting various government agencies- that's a discussion I might agree with! But it warrants a lot of further study. I doubt you know 90% of what most of those agencies do.
That last sentence: "People have a fundamental RIGHT to what they own and earn. Property rights are paramount."
Nobody is debating that- but taxation is constitutional. As for property rights- who the hell is questioning that?
In conclusion, you're a little annoying baby yelling 'no fair' when you already have more than nearly everybody else. Calm the fuck down. After all, we're the ones working on Wall Street taking advantage of the government in a bigger way - not some "welfare queen" living in the ghetto around crack dealers, with crying babies, domestic abuse, and the continuous hustle of obtaining a shift at the "nice" McD's around the corner from your office.
Rednecks? Right wing?
I'm not American.
I'm not right wing, I follow whatever benefits me, I don't give a damn what either party has to offer as long as it benefits me in the long-run and makes 'business' easier (financially/cost-efficient obv).
So basically everything I said is true. Also, how do I have to prove that the only way a high income earner pays a lower % of taxes is through a blended rate (investment income and wages or through deductions). That is how the tax system works.
If you have two people.
1) Makes 50K at their job
2) Makes 200K at their job
Zero deduction, zero investment income, the person making more will pay an absolute higher amount and a higher proportional amount. The IRS and the various tax rates on different income streams, along with incentives through deductions skew things.
I also do not expect the poor to pay more, as I mentioned above. I expect them to shut the fuck up about what others pay. When you pay nothing you shouldn't question what I pay. If my taxes are >0, then I automatically pay more than you.
It is like a tape worm bitching about the food someone eats. Shut up and leech.
As for your other insults and un-backed up statements, I will simply ignore them.
@TNA
Wait,so you still think the joke is an accurate depiction of reality?and re-read my last post. Everything you said was true, but a completely nonsensical rational.
please consider this: A typical family that pays no income tax (as I alluded in my analysis above, 85% of the 42% of people paying no fed income tax are this household income or worse): $33,542 household with 4 people.
Now, as said above- the US poverty threshold (as said before) would come out to--with 4 people-- $23,050. So they avoided $10,000 of taxes from with whatever deductions- child credit, etc.
Now- what's the total amount of taxes these people avoided with 1) no fed taxes below poverty level + 2) their avoidance of taxes on $10k. well, tax brackets: 10% tax on $0 to $8,700, 15% on $8,700 to $35,350 So they avoided almost $4,870 in taxes!
Now- do wealthy people have many provisions that let them save much more than $4,870 on taxes- provisions that such a poor family would not have? e.g. a retirement account? (Saving a lot more than $10,000 from being taxed!) or mortgage deductions. Let's not even get into capital gains.
Now you might say- hey I just don't agree with that "deduction" where no income under the federal poverty level is taxed? Then how do you rationalize the capital gains rate?
So do you understand why this is an inherently stupid thing to say? They might avoid fed income taxes on their meager total incomes- but that's nothing compared to taxes avoided on just say the portion of your income you protect from taxation through a retirement account. (I don't know how big your income currently is, but at one point).
Lastly, please tell me where these poor people are even standing up and complaining about taxation? On the other hand, a large portion of them appear to agree with the tea party?
Un-backed up? I'm the one who has been posting real numbers. You're the idiot saying things like "If I my taxes are >0, then I automatically pay more than you"oh and
Did I ever disagree with you? No shit sherlock. I was asking you to give a specific example. (so I could point out how commonplace it is and the fairness of that vis a vis your bitching about the poor paying no fed income taxes.)
While I agree with pretty much everything you said, I would say the Occupy Wall Street movement was pretty much poor people standing up and complaining about taxation (among other things), though its not clear if they really knew what they were complaining about.
All in all, that was a dumb anecdote and this is a dumb thread.
Dude, the story is an analogy to our progressive tax structure and how people who eat for a reduced price complain when the people who pay for their meal and others get a tax deduction. I've seen this example in a variety of iterations. The math is largely irrelevant. It is illustrative of how people who pay little to no federal taxes complain when "the rich" aka the people who pay the majority of taxes receive a reduction.
And what the F are you saying? You are taking a made up example and applying that math to income tax? I am talking about the actual, current system we have.
If two people have nothing but income derived through work and have no deductions or credits, the high earned will pay more absolutely and proportionately. When Buffet says he pays less than his secretary he is being dishonest. His income tax rate is higher, but his blended rate is lower because he gets most of his income from investments which are taxed at a lower rate.
And are you really disagreeing with 1>0? If you make 100K and pay nothing and I make 40K and pay $5K, you still paid nothing and should shut up about tax rates (up or down). If you aren't paying into the system you should just enjoy it and not worry what others pay.
Is what's fair, what is best?
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