Originally Posted by sob

Talk about Economics 101!



I'll make it easy for you (and no, I'm not claiming I wrote this):

Suppose that every day, ten men go to dinner. The bill for all 10 comes to
$100. If we paid it the way we pay our taxes, the first four men would pay
nothing, the fifth would pay $1, the sixth would pay $3, the seventh $7,
the eighth $12, and the ninth $18. The tenth man, the richest, would pay $59.

The ten men ate dinner every day and seemed quite happy with the
arrangement until the owner threw them a curve. Because you are all such good customers, he said, I am going to reduce the cost of your daily meal by $20.

Now, dinner for the ten men cost only $80.
The first four were unaffected. They still eat for free. Can you figure
out how to divvy up the $20 savings among the remaining six so that everyone gets his fair share? The men realize that $20 divided by 6 is $3.33, but if they subtract that from everybody's share, then the fifth and sixth man would end up being paid to eat their meal.

The restaurant owner suggested 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 10th man with a bill of $52. Outside the restaurant the men began to compare their savings.

"I only got a dollar out of the $20," declared the sixth man, pointing to the
tenth, "and 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 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 next time.

Also called "offshoring."