Tuesday, January 14, 2003

 
A Parable of Taxation and Propaganda

A friend of mine sent me the following to illustrate the way taxes work in America. What it succeeded in illustrating was that my friend is either blindly partisan or grossly ignorant (of course the two characteristics commonly coexist in Republicans):


Tax laws as seen through the eyes of Republicans....

A Lesson in Tax Laws

This is a VERY simple way to understand the tax laws.

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,and the tenth man-the richest-would pay $59.

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 (in tax language a tax cut).

"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 $80.00.

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 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 paid nothing, the sixth pitched in $2, the seventh paid $5, the eighth paid $9, the ninth paid $12, leaving the tenth man with a bill of $52 instead of his earlier $59. 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, but he, pointing to the tenth. "But 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, a little late what was very important. They were FIFTY-TWO DOLLARS short of paying the bill! Imagine that!

And that, boys and girls, journalists and college instructors, is how the 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.

Where would that leave the rest? Unfortunately, most taxing authorities anywhere cannot seem to grasp this rather straight-forward logic!

WHAT? So, let's see, this suggests that if we make the wealthy people angry, they're likely to do... what? Stop making money? Renounce their citizenship? Incorporate offshore? Stop paying their taxes? What? I would like to know. And whatever "it" is that would cause them "not to show up at the table", I hope "it" informs them that they are no longer welcome doing business in America. Oh, and by the way, 50 people are already vying for that spot that they abandoned because they recognize that this particular spot at the table has far more advantages associated with it than disadvantages.

Well, once you forge your way through all the condescension and whining self-ingratiation, you come to the moral of the parable:

1) We should pray that, maybe some day, we too can be a part of that "lucky" group of people who earn $12,000 per year and pay no income tax.

2) We better be darn grateful to all those wealthy people for paying for our dinner.

3) We should do everything we can to make life easier for them. and

4) We should be ashamed that we wanted to give a financial boost to the working poor.

At first, I thought this was a joke, but I quickly realized that this was a sincere attempt by a Republican hack to "tell it like it is." My friend was dead serious. Of course, therein lies the problem. Republicans would have everyone believe that there is no tax besides income tax. Nevertheless, you and I know that this "analysis" is grossly spun to create sympathy for those poor, overtaxed millionaires by eliminating any payroll, sales or other taxes (including tolls on public infrastructure) from the equation...a typical Republican tactic.

In reality, as a percentage of income, these taxes weigh far more heavily on the poor. So indeed, none of those mentioned in this analogy pay $0. The fact of the matter is that if the Bush Administration wanted to help all Americans and stimulate the economy, it would cut payroll taxes, not dividend taxes or capital gains taxes or estate taxes.

Anyway, if Republicans really want to address those who pay no taxes, let's take a look at the massive number of corporations who earn millions if not billions which not only pay no taxes, but also receive massive government subsidies, contracts and seeming encouragement to incorporate offshore. (That is fodder for an article of it's own. Coming soon.)

Before going, I owe an apology to Professor Thomas Davies at the University of South Dakota, to whom this "taxation Parable" was wrongly attributed. The true author obviously didn't feel comfortable attributing it to himself.
posted by Thomas Ball 9:44 AM