Thoughts Still Deep

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Tax cuts.

I lifted this article from Phil's blog, he claimed that it gave
a clear explanation of Tax Cuts.

This was written by a UGA professor
It is interesting to hear a professor present a realistic view of how economics
really work.

CLEAR EXPLANATION OF TAX CUTS.........................

Sometimes politicians, journalists and others exclaim;

"It's just a tax cut for the rich!" and it is just accepted to be fact,
without questioning it

But what does that really mean?
Just in case you are not completely clear on this issue, the following might help.

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

Suppose that every day, ten men go out for beer 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 men drank in the bar 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 beer by $20."

Drinks for the ten 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 drink for free
What about the other six men, those paying the tab?

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 share, then the fifth man
and the sixth man would each end up being paid to drink his beer.

So, the bar 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 drink 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 I!"

"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!"

The nine men surrounded the tenth and beat him up.
The next night the tenth man didn't show up for drinks, so the nine sat down
and had beers without him.

But when it came time to pay the bill, they discovered something important.

They only had enough money between all of them for 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 anymore.

In fact, they might start drinking overseas where the atmosphere is somewhat
friendlier.

David R. Kamerschen, PhD
Professor of Economics
University of Georgia

Tennant Creek, is a small outpost on the Sturt Highway in Australia's
Northern Territory

Locals like to tell strangers that the original site for the town was further
north by about 10 kilometres, near the old Telegraph Station.

The truck bringing in the beer became stuck in deep mud near the site where
the Tennant Creek Hotel now stands.

The town developed around the bogged truck, so the legend goes.

I cannot verify this as a true incident.

Maybe it is just one of those fanciful lies that flourish in the bush and get
handed down through the generations as folklore.

In any event, the truth should never be allowed to interfere with a good story.

Cultivate your curves - they may be dangerous but
they won't be avoided.
Mae West