Does this tax cut explanation hold water?

[ObaMania]

Soem freeper type at another forum put this out there telling people complaining about tax cuts for the wealthy to STFU.

ECONOMICS LESSON-
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 and/or do not
understand this
issue, the following should help, if you are a reasonable
person.

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 on 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 of you 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.
But what
about the other six men - 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 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
on a percentage basis rounded to the nearest dollar, 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 $50 instead of $59 (15% 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 $9!"

"Yeah, that's right," exclaimed the fifth man. "I only saved a
dollar, too.
It's unfair that he got nine times more than I!"

"That's true!!" shouted the seventh man. "Why should he get $9
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 they didn't have enough money between all of
them for even 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
somewhere
else where the atmosphere is friendlier.

[TheBaldyMan]

1. they missed the bit where the barkeep sacked help and can't afford healthcare anymore

he stopped training his staff and outsourced his book-keeping to india.

The tax cuts are just that, tax cuts for the rich. The ones that need it least are the biggest beneficiaries. Also note that the benefit to the poorest is zero.

The real moral of this story, FReepers are full of it. Look up sophistry in a dictionary. An ingeniously presented argument that appears logical at first sight but is found to be flawed on deeper examination.

[Bucky]

2. I assume this is an email that's going around. I feel so bad for those rich folks.

This sounds so unfair, cause it sounds like they're all getting the same beer. But let's remember than four out of the ten income earners aren't "drinking beer" for free. Let's keep in mind that the guy paying $59 for a beer is also earning fifty times what the average beer drinker earns.

Whoever wrote this doesn't understand progressive taxation policy.

[rfranklin]

3. Except that in the real world, the rich person cannot be rich without the...

other nine showing up for work. So this is just a moronic story with the threat of losing their beer rations to alarm the freepers. No rich people = no beer!

[Warren Stupidity]

4. No that explanation is standard neoliberal bullshit.

We are not talking about beer. 99% of the population is essentially living hand to mouth. 1% of the population is wealthy and 0.1% of the population is wealthy almost beyond comprehension.

We are not talking about beer, about discretionary income. Progressive taxation taxes the upper end more because they actually have discretionary income. The rest of us are struggling with elder care, with college tuition, with housing and fuel costs that vastly exceed the official inflation rates. We got nothing from the neoliberal tax cuts because, like for example the estate tax cut, they were targeted at the 0.1%, not because of the bullshit beer analogy.

[MonkeyFunk]

5. What a nice socialist utopia....

the richest and poorest all the get the same beer.

Of course, in the real world, the first two guys would be drinking pruno, cuz they'd be in prison.

The next three would get a six pack of Pabst on the weekend.

The next three would get would get a decent mid-priced bottle of one once or twice a week.

The top two would be flushing their toilets with Dom Perignon, while their personal bartenders fixed them Grey Goose martinis, two olives, please.

[papau]

6. Bull - those dollars the rich have are from assets in the US protected by

US infrastructure.

If you have little in the way of assets, you have little "skin" in the need to protect both from theft/war and from economic turmoil that disturbs the production of more wealth (the "return on investment").

So those that need - should be those that pay - and that means the rich. Indeed it argues for a wealth tax - but our media keeps selling the nice people do not punish success, so we have an income tax that taxes only 10% of the wealth of the richest cohort (their wages) because we again are told that the investment income they have which is 90% of their income is not to be fully taxed if taxed at all, because we do not want to discourage investment - as if the rich will let their money sit idle and get no money if investment income were taxed, or that they would sell their US assets (so what - sale causes no problems) or move jobs (which they do anyway) or invest new money coming from investment returns in other countries (again they do so anyway).

Taxing the middle class and poor - at minimal levels but still taxing them something - is good from a nation building/pride that we are all in this together point of view. Plus the vast differences between the super rich and the rest of us means that the better off - but not so rich - must be taxed in order to raise the income needed - or so we are told. I buy this need to tax the middle class -but I worked in the 90's putting together ten's of billions dollar single deals for a single "person" - granted the "person" was most often a huge company but often they were just that - a single person that could write a $5 billion check via assets hidden in various trusts that each held assets in various locations. So there are a lot of hidden assets of the super rich families - I just do not know how much, and doubt we could get the world to change enough to expose those assets to a wealth tax. So I buy the need to tax the middle class. I just do not buy the need to cry for the rich if we tax the rich on 100% of the income - 100% of wages and 100% of investment income - and do so at a very high tax rate similar to the 50 to 70% rates we had pre-Reagan. Indeed I like a wealth tax even if it would "punish success" -- if only because "punish success" is so stupid a phrase! :-)

[Not Me]

7. Try this for a rationale for progressive taxation

http://www.bankrate.com/brm/calc/moviestar/movieS_salary.asp

[SoCalDem]

8. Rich guy would be at his private club getting free drinks

:)

[frogcycle]

9. So the big capitalists

who are raping and pillaging, taking home $30M bonuses for running companies like Blackwater, Enron, Haliburton, sucking the treasury dry, say if we don't let them keep it all and fund the deficit that gives them those bonuses by borrowing from China, they will take their marbles and go to Dubai.

Well, kiddies, maybe, just maybe, the middle class does not actually NEED to have them. Maybe, just maybe, their "management" of their companies is pretty much like Bonnie and Clyde's "management" of banking.

Maybe Karl Marx had a friggin point!


The middle class has been under attack for several decades. Listen to the neocons spokesman limbaugh: "FDR is DEAD! Forget about him" They would dismantle every social program in existence, roll back the clock to medieval times, and enjoy their ultra-wealthy lifestyles in their castles, playing polo and riding to the hounds, while 98% of the population live in squalor. That is their vision. It is their goal. The sad irony is that they get the support of a big chunk of the people they have every intention of screwing by dangling catchphrases like "family values" and other shiny objects.


The whole argument for "tax and spending cuts" flew out the window when they started running up a tab we can't pay. Reagan did the same thing with "voodoo economics".

They do not give a crap about the survival of the United States as a country. Their vision is an elite class running the world, with US citizens, South Americans. Southeast Asians, ALL working in sweatshops.

The math just does not work.

What we desperately need is a simplified tax law with NO loopholes. Using "tax incentives" to bring about social engineering is wrong, and the conservatives should be violently opposed to it if they were true to their claimed agenda.

If the rich actually PAID the taxes; if big corporations actually PAID taxes, then we could talk about equitable rates. Bottom line though, the funds have to come from somewhere. They have chiosen to spend more than is available on a war of colonialism, and claim it is their right to fund it by cutting social programs, VA benefits, etc. WRONG! Fund it with taxes on oil companies and their high-paid executives! (over simplistic, perhaps, but still...)


If this war of aggression had been trumped up by some big companies who recruited mercenaries, bought bombs and bombers from Boeing, Raytheon, et al, funded it all with their own corporate profits, they would now be saying "oops, bad investment; pull the plug"

[Union Thug]

10. "They may not show up anymore" ...and there's a problem with that?

Sounds like a pretty good opportunity for the rest of us.

Good riddance, I say.

[sutz12]

11. Hey, makes sense to me....

That is obviously why everybody in the country is trying to get down into the lowest income bracket.

They get free beer! :)

:sarcasm: