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.
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
"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!
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.
New York Mayor Bloomberg Says Liberal Tax Policies Will Lead To Nowhere
By Michael Eden
You don‟t expect wisdom from people who have too-often sided with fools, but conservatives found an unexpected ally
today in Mayor Mike Bloomberg.
He basically says that, while he understands how fun and rhetorically useful Marxist class-based demagoguery is, we‟d be
fools to actually govern that way.
By DAVID SEIFMAN, February 14, 2009
Charging that it‟s “easy to rile against the rich,” Mayor Bloomberg warned yesterday that the income-tax increases being
considered for the wealthiest New Yorkers would drive them from the city.
“One percent of the households that file in this city pay something like 50 percent of the taxes. In the city, that’s
something like 40,000 people. If a handful left, any raise would make it revenue neutral,” the billionaire mayor said on
his weekly radio show.
“The question is what’s fair. If 1 percent are paying 50 percent of the taxes, you want to make it even more? Anybody
below that 1 percent, no taxes?”
Legislators in Albany are considering state income-tax hikes for households earning from $250,000 to $1 million to close a
budget gap next year of at least $13 billion.
At the same time, City Council Speaker Christine Quinn this week proposed three higher tax brackets in the city with a top
tax of 4.65 percent for married couples with incomes of $1.2 million or more.
Bloomberg is taking a political risk by standing up for the rich in his re-election year.
Polls show the mayor‟s popularity is highest in Manhattan, the wealthiest borough, and lowest in The Bronx, the poorest.
But that didn‟t stop him from questioning the wisdom of loading tax burdens onto the rich.
“Keep in mind little over half the households that file tax returns don’t pay any taxes, and about 30 percent of the
households that file get a credit from the government, that’s the Earned Income Tax Credit,” he said.
“It‟s also true that it‟s easy to rile against the, quote, rich. I saw one group wants to give affordable housing to people up to
$240,000 income a year, but $250,000, they‟re millionaires and we‟ve got to tax „em.”
State Sen. Diane Savino (D-SI) said Bloomberg‟s concerns about a millionaires‟ exodus is unfounded.
“Research does not bear out that people get up and leave,” she said. “People say they‟ll go to New Jersey. Their taxes are
higher. It‟ll cost them more to live there.”
1. In order to help pay for budget deficits at the national and state levels, should the wealthy (top 10% >$114,000) pay
a greater percentage in taxes? Or should taxes be more evenly distributed across the board?
A spokesman for Assembly Speaker Sheldon Silver declined comment.
Well, first of all, allow me to deal with the idiot liberal bimbo Diane Savino who says, “Research does not bear out
that people get up and leave.”
It doesn‟t as long as you don‟t bother to live in the real world.
Let me simply present a couple headlines:
From The Wall Street Journal: “California’s Gold Rush Has Been Reversed: Entrepreneurs are fleeing
heavy taxes in the state.”
From National Review Online: “Exodus From California.”
That last article presents a survey from the California Business Roundtable that found:
1. The cost of doing business in California is 30 percent higher than the western-state average.
2. Almost 40 percent of the California decision-makers participating in the Roundtable survey plan to “outsource”
jobs from California to other western states, preferably Texas.
3. Half of the companies have “explicit policies to halt employment growth in California while less than five
percent of companies have retention policies in place to keep jobs in California.”
4. Last, California‟s “regulatory environment is the most costly, complex and uncertain in the nation.” Regulatory
costs are 105 percent higher in California than in other western states.
Outsourcing from one country to another is as legitimate as outsourcing from one state to another. It‟s a principle
from Econ 101. And, it works: Just monitor California.
The LA Times, discussing California‟s $42 billion budget deficit, refers to the fact that “California‟s government
continued its grinding downshift toward insolvency.” And technically the state - which is failing to meet
obligation after obligation - is already insolvent.
It is rather fascinating that the states with the highest tax rates are experiencing the worst budget deficits and the
greatest financial crises.
It is amazing that if those 40,000 rich New Yorkers got tired of being demonized and demogogued and left New
York City, that the city would essentially just shrivel up and die. If even a significant fraction of those 40,000
decided that the sun was warmer and the taxes were lower in Arizona or Florida, the city would implode from the
weight of its own socialist social structure.
I understand that it is rich people, not poor people, who create jobs. When was the last time a poor person hired
you for a job?
I understand that rich people, not poor people, invest in the economy and support the economy with their taxes. As
just one example, for all the demonization of “Wall Street bonuses” by the Democrats, the loss of those bonuses
cost the state of New York a whopping $1 billion in tax revenues. And the poor aren‟t going to make up for that
loss in revenue.
And I understand that rich people got rich in the first place by working harder and for longer hours, by investing in
more education for themselves, and by saving and investing rather than spending and consuming. I understand that
they got rich by sacrificing the short-term for the longer-term benefits.
Meanwhile, Democrats are tearing our economy down. Last night on Sean Hannity, they played a montage of at
least 25 times that Barack Obama described our economy as being in “crisis” in order to fearmonger his porkulus
bill. Does that make you want to risk investing in better days? And private jet manufacturers saw their businesses
tank after Democrats demagogued the automakers for having the unmitigated gall to fly to the Capitol in private
Even former communist KGB agent Vladimir Putin knows that socialism doesn‟t do anything but drag down an
Now that Democrats have no one to demagogue, we‟ll see what a disaster they make of the economy. They are
already off to a bang-up beginning.