Tax cuts naturally benefit those who pay more

There's been a lot of talk lately about Bush's proposed tax cut. There are legitimate points to be made on both sides, of course, but there's one line of reasoning that really bugs me. That is when someone says that we should avoid the tax cuts because they "give more to the rich."

What nonsense! First of all, the government is not "giving more money" to anyone; they're merely "taking less money" than they were before. Second, it should be obvious that the tax cuts are greater for the rich simply because they pay much more taxes to begin with.

Unfortunately, arguments like this become highly politicized, with all kinds of buzzwords and emotion thrown in to confuse things. So let's cut through the rhetoric and look at it in the form of a little story that I received in an email from a friend:

Suppose that every day ten men go to a restaurant for dinner.

The bill for all ten comes to $100. If it was paid the way we pay our taxes,

• The first four men paid nothing;
• the fifth paid $1;
• the sixth paid $3;
• the seventh $7;
• the eighth $12;
• the ninth $18.
• The tenth man (the richest) paid $59.

The ten men ate dinner in the restaurant every day and, despite the inequity of the bill, they were okay with the arrangement. Then 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 meal by $20."

Now, dinner for the ten only costs $80. The first four are unaffected -- they still eat for free. Can you figure out how to divide 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 man and the sixth man would end up being paid to eat their meal.

The restaurant owner suggested that it would be fair to reduce each man's bill by roughly the same percentage, being sure to give each a break, and he proceeded to work out the amounts each should pay.

And so now:

• Along with the first four, the fifth man paid nothing;
• the sixth pitched in $2 ($1 less than he did before);
• the seventh paid $5 ($2 less);
• the eighth paid $9 ($3 less);
• the ninth paid $12 ($6 less);
• leaving the tenth man with a bill of $52 ($7 less than his previous bill).

Outside the restaurant, the men began to compare their savings. "I only got a dollar out of the $20," complained 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 I did!"

"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. "We didn't get anything at all. The system exploits the poor."

Then, the nine men surrounded the tenth man (the richest one, paying the most) and beat him up.

The next night the richest man didn't show up for dinner, so now the nine men sat down and ate without him. But when it came time to pay the bill, they discovered something very important -- they were $52 short!

And that, folks, is how America's tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Punitive taxes discourage productive people from contributing more to the economy. Tax them too much, attack them for being wealthy, and they just may not show up at the table any more.