Sponsor Message:
Non Aviation Forum
My Starred Topics | Profile | New Topic | Forum Index | Help | Search 
Why The U.S. Tax System Is Unfair  
User currently offlineSmithfly114 From United States of America, joined Mar 2004, 243 posts, RR: 1
Posted (10 years 4 months 1 week 2 days 7 hours ago) and read 2316 times:

Subject: Economics


Sometimes Politicians can exclaim; "It's just a tax cut for the rich!", and it is just accepted to be fact. But what does that really mean? Just in case you are not completely clear on this issue, we hope the following will help.

Tax Cuts - A Simple Lesson In Economics

This is how the cookie crumbles. Please read it carefully.

Let's put tax cuts in terms everyone can understand. 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.

So, 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 each 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, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33% savings).
The seventh now paid $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 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 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 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, so the nine sat down and ate 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 at the table anymore. There are lots of good restaurants in Europe and the Caribbean.

David R. Kamerschen, Ph.D.
Distinguished Professor of Economics
536 Brooks Hall
University of Georgia

55 replies: All unread, showing first 25:
 
User currently offlineCfalk From , joined Dec 1969, posts, RR:
Reply 1, posted (10 years 4 months 1 week 2 days 7 hours ago) and read 2220 times:

It's a good, and pretty accurate account. Pity that it's not as politically acceptable or easy to mindlessly repeat than "Tax cuts for the rich".

Charles


User currently offlineAlpha 1 From , joined Dec 1969, posts, RR:
Reply 2, posted (10 years 4 months 1 week 2 days 7 hours ago) and read 2214 times:

You forgot one thing: the 10th one spent a lot of money on a tax lawyer to find all the loopholes in the laws, so that instead of paying $49, as you say, he ends up paying $9. That's a reality for many wealthy people. They don't end up paying taxes that they should because of loopholes. That's why the system is unfair.

User currently offlineSmithfly114 From United States of America, joined Mar 2004, 243 posts, RR: 1
Reply 3, posted (10 years 4 months 1 week 2 days 7 hours ago) and read 2211 times:

Sorry but there is no loophole when 50% of your paycheck goes right over to uncle sam.

User currently offlineZak From Greenland, joined Sep 2003, 1993 posts, RR: 8
Reply 4, posted (10 years 4 months 1 week 2 days 7 hours ago) and read 2207 times:

what a bad attempt at justifying tax cuts for the rich. the above model does not take a few key facts into account, such as the lower amount of rich people. if you add 100 guys that were to pay the 3$ bracket of the bill, you would still have a severe overrepresentation of the rich in above model, and it would already make them lose out most.
also, especially in countries with low social security and minimum wages such as the u.s.a., the fact that most of the "riches" of the rich people were made on the backs of poorly paid peasants needs to be taken into account aswell, hence giving reasoning for a substantially higher taxation of rich people to ensure the social responsibility is maintained by them.
if you dont do that you have a society moving back towards the medieval, where rich people are getting endlessly richer and poor people dont exactly reduce in numbers. but wait, i think that is what is happening under the cover of globalization right now! how does anybody dare to oppose the new religion of globalized profit for the upper class.

p.s.
before bringing up arguments like "you are just jealous", i come from a rather wealhly background, its more that i rather know how it works that makes me think like that, unlike people who believe in the globalization miracle without understanding it (or thinking they understand it because they read a book about adam smith in college)



10=2
User currently offlineCfalk From , joined Dec 1969, posts, RR:
Reply 5, posted (10 years 4 months 1 week 2 days 6 hours ago) and read 2205 times:

That's an exagguration, Alpha. Typically, a high-flight lawyer will be able to cut the tax about in half ($29.50), but much of that is simply tax deferment rather than tax evasion or tax avoidance (at least if only legal methods were used). A deferment simply delays when you have to pay the tax, such as investing in a locked retirement fund.

But I am in favor of cutting out most tax exemptions. To me, the comprehensive tax code for individual income tax should be able to fit in a booklet, say 10 to 20 pages long. The tax form itself should be no more than a couple of pages.

Charles


User currently offlineZak From Greenland, joined Sep 2003, 1993 posts, RR: 8
Reply 6, posted (10 years 4 months 1 week 2 days 6 hours ago) and read 2206 times:

i almost forgot to mention it:
i fully agree with the topic, the u.s. tax system is unfair, but to anyone not rather wealthy or rich.



10=2
User currently offlineRalgha From United States of America, joined Nov 1999, 1614 posts, RR: 6
Reply 7, posted (10 years 4 months 1 week 2 days 6 hours ago) and read 2201 times:

What Alpha1 is saying is that 50% of their paycheck doesn't go right over to Uncle Sam because of loopholes they've found.


09 F9 11 02 9D 74 E3 5B D8 41 56 C5 63 56 88 C0
User currently offlineSmithfly114 From United States of America, joined Mar 2004, 243 posts, RR: 1
Reply 8, posted (10 years 4 months 1 week 2 days 6 hours ago) and read 2197 times:

So who here would favor a flat tax across the boards? This is the only logical system I see...

User currently offlineCptkrell From United States of America, joined Sep 2001, 3220 posts, RR: 13
Reply 9, posted (10 years 4 months 1 week 2 days 6 hours ago) and read 2194 times:

Who would favor a flat tax? Probably most everybody except accountants; their ranks would surely dwindle. Regards...Jack


all best; jack
User currently offlineSmithfly114 From United States of America, joined Mar 2004, 243 posts, RR: 1
Reply 10, posted (10 years 4 months 1 week 2 days 6 hours ago) and read 2192 times:

I don’t blame the wealthy for not wanting to pay a ridiculous amount of their salary. They have made the money in a free market economy where a transaction will only occur if BOTH parties benefit.

User currently offlineDonder10 From Canada, joined Oct 2001, 6659 posts, RR: 22
Reply 11, posted (10 years 4 months 1 week 2 days 6 hours ago) and read 2183 times:

if you dont do that you have a society moving back towards the medieval, where rich people are getting endlessly richer and poor people dont exactly reduce in numbers. but wait, i think that is what is happening under the cover of globalization right now! how does anybody dare to oppose the new religion of globalized profit for the upper class.

Perhaps you should read some David Ricardo Smile


User currently offlineSmithfly114 From United States of America, joined Mar 2004, 243 posts, RR: 1
Reply 12, posted (10 years 4 months 1 week 2 days 6 hours ago) and read 2170 times:

We can argue all day about how "the rich get richer and the poor get poorer," but so many people fail to realize that if BOTH parties participating in a transaction do not feel they are benefiting, or if the costs outweigh the benefits then the transaction will not occur. Lets take for example migrant workers from Mexico into CA. The argument is made that the workers are exploited and taken advantage of. (In not here to argue if they are or not) But the fact is those workers who came to CA to work, see that change as a benefit to them! The benefits of that move outweigh the costs, or else they would not be there! This is the way our entire free market economy works, if both parties don’t benefit from a transaction, the transaction will not take place. PERIOD

-CCS


User currently offlineAloges From Germany, joined Jan 2006, 8669 posts, RR: 43
Reply 13, posted (10 years 4 months 1 week 2 days 5 hours ago) and read 2160 times:

Let me counter this with an even simpler scenario:

A factory owner employs 200 people that earn 2.000 dollars a month. That's 400.000 dollars of wages each month. The income of the factory, with all costs being deducted, is 500.000 dollars per month. The factory earns its owner 100.000 dollars in a month.

But the factory owner decides that this isn't enough, he just needs that sparkling new yacht and has to find a way he can afford it. So he decides that his factory must earn him more money, one way or the other. He thinks about cutting wages, but that wouldn't fit the idea of what his image has to be. There has to be another way.

One day, the factory owner wakes up and has a flash of genius - that machine he saw some time ago has to be the best invention ever! He checks what it could do for his factory and comes up with the following equation:

  • The machine will cost him 500.000 dollars.

  • It can render 80 workers unnecessary.

  • If 80 workers can be "laid off" (a.k.a. "fired"), that will save 160.000 dollars a month.

  • At that rate, the new machine will be paid for in 3,125 months.


  • However, the workers have recently demanded a raise - so the factory owner thinks to himself "Well, I can wait a little longer until I get my yacht." and agrees to give the workers a huge 5% raise. He also decides to buy the machine and lay off those 80 workers.

    He continues with 120 workers earning 2.100 dollars per month, so wage costs are now 252.000 dollars a month - that's a 148.000 dollars saving. At that rate, the machine will be paid for in about 3,38 months. After that period, the factory owner will earn 248.000 dollars a month instead of 100.000 dollars a month. He has appeased his workers because he gave them a raise, has been praised by analysts for cutting production costs, and has been applauded by local authorities for his commitment to the location of his business. Basically, everyone loves him and he will be able to buy that fancy yacht.

    But where's the hitch? Well, you have to look at those 80 workers. They are 80 more people who can't pay a dime at the restaurant. And the factory owner claims he deserves a tax cut because he did so much for his employees, and thus for the country.



    Walk together, talk together all ye peoples of the earth. Then, and only then, shall ye have peace.
    User currently offlineDonder10 From Canada, joined Oct 2001, 6659 posts, RR: 22
    Reply 14, posted (10 years 4 months 1 week 2 days 5 hours ago) and read 2154 times:

    But where's the hitch? Well, you have to look at those 80 workers. They are 80 more people who can't pay a dime at the restaurant. And the factory owner claims he deserves a tax cut because he did so much for his employees, and thus for the country.


    The same argument that is being used with the current ''outsourcing stampede''.Technological process has never resulted in creating long-term unemployment in industralised economies.


    User currently offlineAloges From Germany, joined Jan 2006, 8669 posts, RR: 43
    Reply 15, posted (10 years 4 months 1 week 2 days 5 hours ago) and read 2148 times:

    CCS, what you wrote is basically true for "first world" economies. In those, most people can choose between accepting a deal and not accepting it because they know they can survive with or without it, and they have alternatives. The state will pay for them if they get into too deep trouble.

    But when you look at "third world" countries, it's a different story. First of all, many people in those countries simply don't know the difference between a good deal and a bad deal. In other words, they are extremely vulnerable to persuasion. One example that comes to my mind is that of Indian farmers buying "hi-tech seeds". They were told that those seeds would improve their crops, and that the higher cost of those seeds would forever be outbalanced by higher earnings due to better crops. The farmers thought "Hey, what a good thing! We'll earn money!" and bought the seeds. They also used up the reserves of "old fashioned" seeds because they a) wouldn't need them anymore and b) couldn't store them forever.

    Once the company had gained a de facto monopoly, they remembered what they had gone to India for: profit. But those farmers weren't paying "enough" for the seeds, and the company wasn't making a big enough profit. So the company raised its prices, and the farmers had to pay more for the seeds. Of course, they tried to use the surpluses of their crops to seed, like they had always done. Pity that nobody had told them that the seeds were so hi-tech that that wouldn't work. So the farmers had to pay prices that they couldn't afford, and thus make sure the company made a profit. They were so concerned about the company's profit that they started to sell their "surplus" kidneys once their financial reserves had been exhausted.



    Walk together, talk together all ye peoples of the earth. Then, and only then, shall ye have peace.
    User currently offlineAloges From Germany, joined Jan 2006, 8669 posts, RR: 43
    Reply 16, posted (10 years 4 months 1 week 2 days 5 hours ago) and read 2139 times:

    "Technological process has never resulted in creating long-term unemployment in industralised economies."

    Donder10, nothing like wiping a deliberate scenario off the table with a one-liner, huh?  Insane



    Walk together, talk together all ye peoples of the earth. Then, and only then, shall ye have peace.
    User currently offlineSmithfly114 From United States of America, joined Mar 2004, 243 posts, RR: 1
    Reply 17, posted (10 years 4 months 1 week 2 days 5 hours ago) and read 2140 times:

    Aloges:

    First of all are you talking about Native Americans or citizens of India?

    I understand what you are saying but you are bringing in another issues I wasn’t, you are including Lying. I was just talking about one straight forward issues compared to another, of course if there is fraud going on it is going to be a different story. Also this company that was supplying the "high-tech" seeds, they were the only company in the world willing to supply seeds them? I find that hard to believe.


    User currently offlineAloges From Germany, joined Jan 2006, 8669 posts, RR: 43
    Reply 18, posted (10 years 4 months 1 week 2 days 5 hours ago) and read 2135 times:

    I'm talking about citizens of India.

    The sad thing about globalisation is that it almost always goes hand in hand with lying, fraud, double standards, greed of gain and overreaching. For example, both the EU and the US have come up with incredible lots of protectionist laws just to protect their economies from the otherwise sacred "beneficent" effects of globalisation. If everyone in favour of globalisation was as straightforward as the theory sounds, you'd be talking to one of its greatest admirers right now.

    "Also this company that was supplying the "high-tech" seeds, they were the only company in the world willing to supply seeds them? I find that hard to believe."

    Certainly not, but that company was the one who persuaded the farmers into buying the seeds. And once a company is supplying seeds to a relatively large region of a country the size of India, things get tricky. I also don't recall if the farmers signed some kind of treaty that obliged them to buy seeds from that company.



    Walk together, talk together all ye peoples of the earth. Then, and only then, shall ye have peace.
    User currently offlineSmithfly114 From United States of America, joined Mar 2004, 243 posts, RR: 1
    Reply 19, posted (10 years 4 months 1 week 2 days 5 hours ago) and read 2132 times:

    Well that is interesting. I didn’t know the story about the farmers in India. I’m not saying I am a fan of globalization. In fact if I had it my way, the US would become totally self sufficient and become isolationist from the rest of this world. ( I know there is alot of baggage that goes along with that)
    All I am saying is that our (inside our country) economic system in the free market form (withOUT market control items such as rent control, price ceilings and floors) is a wonderful system and benefits everyone when working correctly, of course without lying and fraud
    -CCS


    User currently offlineAloges From Germany, joined Jan 2006, 8669 posts, RR: 43
    Reply 20, posted (10 years 4 months 1 week 2 days 5 hours ago) and read 2122 times:

    BTW, I just found an article from May 2001 that describes what I was trying to describe: http://www.poptel.org.uk/panap/latest/mondia.htm.


    Walk together, talk together all ye peoples of the earth. Then, and only then, shall ye have peace.
    User currently offlineSmithfly114 From United States of America, joined Mar 2004, 243 posts, RR: 1
    Reply 21, posted (10 years 4 months 1 week 2 days 4 hours ago) and read 2120 times:

    Aloges:

    Thanks for the article and thanks for the great conversation. It is so refreshing to have a conversation with someone from an opposing viewpoint, and rather than the issue becoming hostile, learning new things and having a stimulating conversation.

    Congrats on joining my Respected Users list
    Thanks
    -CCS


    User currently offlineJamesag96 From United States of America, joined Nov 2001, 2095 posts, RR: 3
    Reply 22, posted (10 years 4 months 1 week 2 days 4 hours ago) and read 2119 times:

    Sorry Aloges, you neglect to mention that the factory owners competitors have already purchased the new equipment and are going to run him out of business soon, much less prohibit him from purchasing the creature comforts he wants.






    Why Kate, You're not wearing a bustle. How lewd.
    User currently offlineAloges From Germany, joined Jan 2006, 8669 posts, RR: 43
    Reply 23, posted (10 years 4 months 1 week 2 days 4 hours ago) and read 2111 times:

    Jamesag96, why not think out of the box for a second? What would happen if the "factory owner" stood for all employers in the world, and his employees stood for the workforce of the entire world?

    When thinking about one company, you're of course correct. Sadly.

    Smithfly114, glad to let you know there's still room on my RU list to continue that little policy of mine.  Big grin



    Walk together, talk together all ye peoples of the earth. Then, and only then, shall ye have peace.
    User currently offlineDonder10 From Canada, joined Oct 2001, 6659 posts, RR: 22
    Reply 24, posted (10 years 4 months 1 week 2 days 4 hours ago) and read 2109 times:

    Or that the new technology will increase productivity and thus overall economic output which in turn creates new jobs for those made unemployed by the initial labour-capital substitution.


    The sad thing about globalisation is that it almost always goes hand in hand with lying, fraud, double standards, greed of gain and overreaching.
    More like the other way round,surely,especially when one considers the growth of trade between high and medium income countries.


    If everyone in favour of globalisation was as straightforward as the theory sounds, you'd be talking to one of its greatest admirers right now
    The problem of mixing politics and global economics.


    25 Post contains images Jamesag96 : Aloges...you mean workers of the world unite type of stuff...
    26 Alpha 1 : To me, the comprehensive tax code for individual income tax should be able to fit in a booklet, say 10 to 20 pages long. The tax form itself should b
    27 MD11Engineer : The same goes for Germany. As a blue collar worker ( though on the upper levels of income) I don´t see that I get taxed at almost 50% (which includes
    28 Jamesag96 : MD11Engineer has it right.
    29 B2707SST : Aloges - Technological developments may temporarily throw certain groups out of work, but they are undoubtedly positive in the long term. In the examp
    30 Smithfly114 : Bingo! Hit the nail on the head there --B2707SST. What a breath of fresh air!
    31 Cptkrell : B2707SST's example is an historic (and true) study of the failure of an imposed luxury tax. Actually, the results were a bit worse; some yacht compani
    32 Zak : a flawed theory to begin with and a bunch of one liners and incoherent examples and we got another thread where the myth of "the lower and middle clas
    33 Smithfly114 : ZAK: you just gave an example of the problem you "claim" is wrong with this post. Flawed theory? How so? How can you dispute the argument that Cptkrel
    34 Aloges : Good to see that people are going more into depth in this thread. I happily admit that my example of people being laid off was more superficial than i
    35 Airplay : There are lots of good restaurants in Europe and the Caribbean. And that is exactly what many of the rich are doing these days. They pack up and inves
    36 Smithfly114 : Who the hell in their right mind would be ok with paying that, when no one else gets taxed nearly that? They made the money why should they be obligat
    37 Cptkrell : Yeah, I'm kinda hoping that Airplay's "59%" was a typo. That's nutso, Regards...Jack
    38 MD11Engineer : What p*sses me off is that, at least here in Germany, 30-40 years ago an average CEO would earn about 10 timesas much as a skilled worker and he would
    39 Post contains images Aloges : Aaaahhhh, the tuneful repercussions of the Vodafone / Mannesmann "Schmierenkomödie"...
    40 Post contains images MD11Engineer : This time last year I was wondering if I would still have a job at April 1st, when our ex boss f*cked off and wasn´t seen anymore with our private pe
    41 Aloges : I guess you got to play your very own role in a similar "business case"?
    42 MD11Engineer : Aloges, What do you mean? Jan
    43 Aloges : Well, when I read reply 38, I immediately thought of Vodafuck / Mann-oh-Mann. But reply 40 sounded as though you were caught in a similar situation as
    44 MD11Engineer : No, this guy just cheated everybody, customers, suppliers and workers. He didn´tn listen to his staff and when the sh*t hit the fan he disappeared. J
    45 Donder10 : We agree 100% on that CFalk. The tax code is an absolute joke the way it is now Couldn't agree more.Simplification of the tax code (including trade ta
    46 Post contains links Zak : @donder10 i was not referring to the system to be flawed but the initial thesis in the posting. it takes 10 people or so and equals each to a certain
    47 B2707SST : The currency market would thus shrink in volume, helping to restore national economic autonomy. It's incomprehensible that a Nobel laureate would not
    48 Cptkrell : Zak; interesting figures albeit somewhat dated. I remember a discussion with a colleague back around two years ago where I jotted down the numbers (bu
    49 Smithfly114 : Beautifully stated Cptkrell! Thus reemphasizing the "American Dream" -CCS
    50 Post contains images Cytz_pilot : Was income tax implemented as a 'temporary measure' during WW1 in the States like it was in Canada? I always thought that was really funny. I bet at t
    51 Post contains images Jamesag96 : "Greed...is Good" Gordon Gecko Thank you, thank you very much. J
    52 J_hallgren : When I hear from people that companies should pay more taxes, i tell them that only people can pay taxes...companies only pass on the tax as a cost it
    53 Cptkrell : Cytzpilot and J_Hall offer basic truisms to the topic. Expanded to reality, there is rarely such a thing as a "temporary" tax. The politicians, no mat
    54 Cfalk : Zak, Remember that companies, unlike individuals, have an incentive to exaggurate their income. The late 1990's were marked by corporations artificial
    55 Go Canada! : Doesnt 1% of the american working population pay 22% of the nations taxes. I am sure they are happy to pay it, its only fair that the rich pay more bu
    Top Of Page
    Forum Index

    This topic is archived and can not be replied to any more.

    Printer friendly format

    Similar topics:More similar topics...
    This Is Why The Southern US Is Messed Up posted Fri Jul 22 2005 00:09:05 by UAL747
    Why The Death Penalty Is Wrong posted Thu Sep 9 2004 19:21:45 by Logan22L
    Appeasement: Why The US Is In Deep Trouble posted Wed Aug 23 2006 20:15:12 by Matt D
    Why The Sky Is Blue posted Wed Nov 30 2005 02:22:01 by Garri767
    Why Don't The US Use The International System Of U posted Fri Jan 28 2005 19:13:05 by TGV
    Why The West Bank Fence Is Justified posted Thu Oct 16 2003 00:04:21 by Tbar220
    Why The US Is Losing The War On Terrorism posted Mon Dec 16 2002 08:00:21 by Twaneedsnohelp
    Is This Why The Internet Was Invented? posted Wed Apr 17 2002 13:53:08 by TNboy
    What Is The Biggest Planet In The Solar System? posted Mon Jun 18 2001 12:37:44 by Air Taiwan
    Why The Double Standards? posted Mon Nov 13 2006 22:09:27 by Tu204