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It is my intent to express my opinion and to discuss current events. Feel free to make suggestions to fields you would like to see covered, and I will consider them. Please leave your name with comments. Thank you. Arabic: عربي.

Friday, April 13, 2007

How the tax system works today; Tomorrow, try my way

Below you will find a very fundamental explanation of how the tax system works. However, I will submit to you that it is not working. Not if you wish for equal protection and fairness under the laws of a free society. But I'll save that for the end. Here we go:
This is a VERY simple way to understand the tax laws. Read on -- it does make you think!!

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 who pointed 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 straightforward logic!

Do you understand now? Do you see any logic in this? If not, may I suggest to you a FAIR tax? It consists of complete removal of the IRS forever (savings in that alone!) to be replaced with a federal sales tax that applies to everyone. This way the people who spends more pay more in taxes. This would be fine, since they are now given the choice on what to buy according to price.

Do not cringe, please! I know that the price and availability are so important to those of us who sit at a desk and crunch numbers, but trust me on this. This is a good theory. Here is why. There would be no taxation on anything not to be considered a final product. A final product would be designated as "A product available for retail."

This way we are not taxed for the flour, sugar, eggs, transportation, etc. which go into the bread we buy. If flour is not taxed, that cost is not passed on to the consumer. Also, the bakery pays less for his product, so our cost is less. This only one of millions of examples.

This is being explained by someone who only took two courses in Economics, but it is also common sense. For each product we buy, every single solitary ingredient is taxed on its way to every place it stops on its way to market. Is that fair? NO! It should be a final product tax, and everyone should pay the same amount.

If you don't want to be on the bottom rung of society, stop sitting there! Get an education, then get a better job. Better yet! Create your own job. This is America. Land of the *taxed to death* free!

By the way, are you aware that the Boston Tea Party was caused by an outcry over a 2% tax?

Hat tip: The Chicken Coop linked to Syringe.Net.Nz.

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