Understanding tax cuts

(Author Unknown)

Some politicians claim, "It's a tax cut for the rich!", and the statement is often accepted as fact. But what does that assertion really mean? Let's put tax cuts in terms that are easy to understand. Suppose that every day, ten men go out for lunch, and the total bill comes to $100. If they paid the 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 men ate lunch in the restaurant every day and seemed quite happy with the arrangement. But one day, the owner threw them a curve. "Since you are such good customers," he said, "I'm going to reduce the cost of your daily meal by $20." Lunch for the ten men now cost just $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 divide the $20 windfall so that everyone would get his fair share?

They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's bill, 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 according to a sliding scale, and he proceeded to work out the amounts each should pay:

The fifth man, like the fist 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 richest man 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. Then, pointing to the tenth man, he said, "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 two? 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!"

Posted by John Eidson, a white conservative who takes great pleasure in black success.