The Truth about Taxes

Mort · Post by **Mort** » January 7, 2003, 12:56 pm

Found this interesting breakdown of taxes and thought I would share it with my fellow Veeshanites. My apologies if you've already seen this, just starting some Tuesday morning discussion........

The Truth about Taxes
by Anonymous

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.
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.

"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. 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.
He 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 something important. They were $52 short!
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.

Unfortunately, Liberals cannot grasp this straight-forward logic!

Fash · Post by **Fash** » January 7, 2003, 1:10 pm

a stretch of an analogy, but it's true.

Chidoro · Post by **Chidoro** » January 7, 2003, 1:31 pm

Well, they wouldn't be missing $52 if the tenth man didn't eat but that's just one of the many things people get sloppy on when they try to make some insightful point regardless of how misguided it is.
People look at taxes and cuts in percentage points rather than totals so the other nine people wouldn't have been bent out of shape like this "author" suggests. People look at rebates in dollar value but not cuts.

What good does it tell you if I say I get charged ~$930 in federal taxes every two weeks? There are so many underlying factors there that you would have no idea if I made $90k or $115k.

Such a simplistic view.

Aabidano · Post by **Aabidano** » January 7, 2003, 1:35 pm

Chidoro wrote:Such a simplistic view.

True, but an analogy like this is the only way most will understand it, and the last way the media will portray it.

Chidoro · Post by **Chidoro** » January 7, 2003, 1:43 pm

Since when has the media taken a conservative stand on anything?

It's not just simplistic, it's inherently incorrect. It doesn't discuss the tax breaks given for capital gains, children, marriage, shelters, 401k's, medical coverage, etc etc. The assumption is that the 10th person makes an average of all the people who are stuck in the 38% bracket, you know, the one w/out an income ceiling.

nevermind

Midnyte_Ragebringer · Post by **Midnyte_Ragebringer** » January 7, 2003, 1:52 pm

That is an excellent way to explain things.

Chidoro, you're the problem. The guy who pays 50 some fucking dollars to eat deserve a capital gains cut. Jesus you people are hard headed.

Chidoro · Post by **Chidoro** » January 7, 2003, 1:55 pm

I probably make more than twice what you earn and pay even more than that percentage in taxes. When you have even a single iota of knowledge in the finance field, give me a call, I'm looking for a junior analyst right now.

Dolt

Fash · Post by **Fash** » January 7, 2003, 2:03 pm

The accuracy of the numbers isn't important for an analogy intended to explain why people who pay more taxes benefit more from a tax cut, and how people who complain about it (illogically) are really stupid liberals.

Mezzmor · Post by **Mezzmor** » January 7, 2003, 2:05 pm

Anyone who has tried to explain this to people is probably completely frustrated that it doesn't get through to the average person.

Couple the tax code with the ridiculous fraud and waste that goes on every day by government employees, government contractors - and you should clearly understand - the ENTIRE system is broken. It's only going to get worse and not better.

We put endless cash into a social security system that guarantees a pittance from the day you retire at the highest age possible until the day you die. If it's the day after retirement, too bad, your family never sees one red cent. This is not your congressperson's problem. Once they serve 1 term, even if its a 2 year term in the house - they become eligible for a pension that equals their annual house or senate salary for life, with a payout to their families.But hey they are looking after our best interested - you are guaranteed a poor retirement, but at least it's guaranteed.

The tax system is designed around a) rewarding the people in society who produce nothing; b)raping the rich; c) keeping the middle class from either becoming rich or at least giving their offspring a better life; d) PROTECTING THE PEOPLE WHO PROPAGATE THIS NONSENSE OVER THE AMERICAN PEOPLE.

Does anyone honestly even wonder why "getting over" has become an accepted way of life in America?

Chidoro · Post by **Chidoro** » January 7, 2003, 2:08 pm

Fash wrote:The accuracy of the numbers isn't important for an analogy intended to explain why people who pay more taxes benefit more from a tax cut, and how people who complain about it (illogically) are really stupid liberals.

Accuracy is everything in the world of finance. Having an incorrect representation of what's going on plays to the ignorance of the masses. Especially the masses that think the words stupid and liberal are synonymous. Nothing more ironic than that

You're also assuming that I'm a liberal when it comes to taxation. I'm afraid you couldn't be any more wrong than that

Xyphir · Post by **Xyphir** » January 7, 2003, 2:11 pm

Chidoro wrote:It doesn't discuss the tax breaks given for capital gains, children, marriage, shelters, 401k's, medical coverage, etc etc.

Children are a tax break? You get a $3,000 for each dependant, and a nominal amount to deduct from your gross income. It cost OMGIAMRETARDEDCAUSEALOTISTWOWORDS more than that to raise a family.

Marriage is a tax break?! I don't think so. Up until just last year, the Standard Deduction for a married couple was much less than two people reporting seperately. It was often call the Marriage Tax PENALTY. This was an outdated practice assuming that the woman would get married and stay home to pump out the chilluns. Most homes now a-days have both parents bringing home the bread.

Insurance is only deductable if your self-employed. Even medical deductions imputed on an Itemized Deduction worksheet (Schedule A) subtract a portion of your income, so unless you had some medical mishap you won't be getting a "shelter".

Even with Capital Losses, you are only able to claim $3,000 if you're married, but luckily, the amount can be carried over.

Finance and Tax Planning are not exactly the same thing.

Chidoro · Post by **Chidoro** » January 7, 2003, 2:23 pm

Xyphir wrote:
Chidoro wrote:It doesn't discuss the tax breaks given for capital gains, children, marriage, shelters, 401k's, medical coverage, etc etc.
Children are a tax break? You get a $3,000 for each dependant, and a nominal amount to deduct from your gross income. It cost OMGIAMRETARDEDCAUSEALOTISTWOWORDS more than that to raise a family.

Marriage is a tax break?! I don't think so. Up until just last year, the Standard Deduction for a married couple was much less than two people reporting seperately. It was often call the Marriage Tax PENALTY. This was an outdated practice assuming that the woman would get married and stay home to pump out the chilluns. Most homes now a-days have both parents bringing home the bread.

Insurance is only deductable if your self-employed. Even medical deductions imputed on an Itemized Deduction worksheet (Schedule A) subtract a portion of your income, so unless you had some medical mishap you won't be getting a "shelter".

Even with Capital Losses, you are only able to claim $3,000 if you're married, but luckily, the amount can be carried over.

Finance and Tax Planning are not exactly the same thing.

Filing jointly or seperately can go both ways depending on who advises you. The penalty you refer to is an outdated old wives tale that varies from case to case. Last year, my wife and I would have benefitted from filing seperately. This year, it may be better for us to do it jointly, I'll find out by Jan 31.

All of those limitations you listed are well and good but who does it benefit? Do you really believe I can only bury $3k for each dependant? Do you think I feel that taxes are just fine for the middle to upper-middle class? Who do you think is more capable of misrepresenting their taxable income?

My medical coverage isn't taxed. I know the different schedules, no need to think you can show off.

Voronwë · Post by **Voronwë** » January 7, 2003, 2:26 pm

i am certainly curious to find out for myself about the so called "marriage penalty".

this is our first year of marriage, and my wife and I are both professionals, so we plan on doing our taxes both ways to see which way is advantageous for us.

Toshira · Post by **Toshira** » January 7, 2003, 2:28 pm

So 40% of American adults pay no Federal Income Tax? Where, pray tell, did you find this fascinating statistic?

vn_Tanc · Post by **vn_Tanc** » January 7, 2003, 2:30 pm

Just goes to show you can prove any bullshit with statistics. Even better if you add in an analogy so simplistic as to be useless.

The 'problem' us 'stupid liberals' have is that although Mister Number1 with his millions may be in a 59% tax bracket, the amount of tax he ACTUALLY pays after shunting it through offshore interests and writing it off against X and using loophole Y is in the low single-figures of a percent.

So modify your analogy to having person1 paying with a Bermudan credit card handled by 2-3 of his accountants, while he eats from a chair that while in the actual restaurant is technically in the territory of Kiribati.

You get the picture.

Voronwë · Post by **Voronwë** » January 7, 2003, 2:31 pm

Toshira wrote:So 40% of American adults pay no Federal Income Tax? Where, pray tell, did you find this fascinating statistic?

if that is truly the case, it is because there are a shitload of extremely poor people.

i made $17k when i was 25 and i paid some income tax, not a lot, but i didnt get all my withholding back by any stretch of the imagination.

so yeah, like Toshira said, i find that hard to 'statistic' hard to believe.

Chidoro · Post by **Chidoro** » January 7, 2003, 2:34 pm

Basically, you look at the standard deduction for filing seperatly and jointly. Typically, if you added up the incomes of both spouses, their standard deduction would be less than the standard deduction each person would get individually. But that doesn't even begin to tell the tale of the entire tax picture for most people.

Xyphir · Post by **Xyphir** » January 7, 2003, 2:39 pm

There is a marriage penalty for couples that cannot itemize due to the standard deduction > itemized deduction.

Filing Single = $4,700 deduction
Married Filing Jointly = $7,850
Married Filing Seperately = $3,925

We could increase our total deductions $1,550 by getting a divorce and each filing single. We don't itemize, and yes, this penalty does not effect those that do, assuming that the amount is over $9,400.

Chidoro · Post by **Chidoro** » January 7, 2003, 2:39 pm

Just like Tanc said, just because you look at taxes and say, "of course the higher get more back, they're paying more", you're not understanding the bigger picture. Me, you, most everyone has nothing to do with this bracket. Stupid liberals might actually make the taxes lower for the more relevant tax brackets if the plan is scrutinized enough.
How about that, liberals might save YOU money and not assume that the trickle down effect was just an idea before it's time

Aabidano · Post by **Aabidano** » January 7, 2003, 2:47 pm

Toshira wrote:So 40% of American adults pay no Federal Income Tax? Where, pray tell, did you find this fascinating statistic?

It wouldn't suprise me if the number was close to that for fedral income tax. When I lived in Escambia County FL the mean income was ~$16,000 a year. With depenents and earned income credit your deductions are going to exceed what you pay.

The nice part was that you could live decently on that.

Fallanthas · Post by **Fallanthas** » January 7, 2003, 2:49 pm

The 'problem' us 'stupid liberals' have is that although Mister Number1 with his millions may be in a 59% tax bracket, the amount of tax he ACTUALLY pays after shunting it through offshore interests and writing it off against X and using loophole Y is in the low single-figures of a percent.

Ok, if I give you a call and say I am coming to seize two thirds of everything you own, are you going to look for a loophole?

Damn straight you are.

So rather than paying a fair share, everyone spends MILLIONS of dollars looking for and exploiting loopholes.

Congrats. Very efficient.

National sales tax all the way, babe.

Mort · Post by **Mort** » January 7, 2003, 3:09 pm

Prz dont flame, Im no expert at any of this shit by any means.... but just an idea.

Drop income tax and jack up the national sales tax, Atleast then the Illegals HAVE to contribute to the economy!!

Bad Idea?

kyoukan · Post by **kyoukan** » January 7, 2003, 3:13 pm

omfg those illegals!!!1

Voronwë · Post by **Voronwë** » January 7, 2003, 3:15 pm

if you can get a budget to deal with a major decrease in revenue stream then maybe that is OK (national sales tax).

neither party in its current incarnation could put together a budget that could be paid for by taxation without income tax. not by a long shot.

Adex_Xeda · Post by **Adex_Xeda** » January 7, 2003, 3:19 pm

liberals might actually make the taxes lower for the more relevant tax brackets

The most "relevant" tax bracket to cut is the tax bracket that invests the most and creates jobs, the UPPER brackets.

Joe Sho construction worker doesn't have the power to create a new company with jobs. A richer man with a tax break does.

Adex_Xeda · Post by **Adex_Xeda** » January 7, 2003, 3:22 pm

BTW, check out this graphic

Data

http://www.irs.ustreas.gov/pub/irs-soi/00in01rt.xls

Any time you cut taxes with such a lobsided distribution of taxpayers OF COURSE the rich will get more back, hell they foot the majority of the bill.

Mort · Post by **Mort** » January 7, 2003, 3:26 pm

Kyoukan, are you saying that we dont have a major problem with illegals in the USA? Please..... I live in California.

Chidoro · Post by **Chidoro** » January 7, 2003, 3:33 pm

That's trickle down ideology and it's never worked. Ever
I might be in the top 5% already, definitely top 10. I'm not creating shit. When I have them, kids college money will take care of that.
Even top 5% is way too broad a measure.

Voronwë · Post by **Voronwë** » January 7, 2003, 3:34 pm

i like many of the things Bush is proposing in his speech right now.

i'm not an economics expert, but on many of the points, the reasoning sounds decent to me. but of course it was written to sound that way

.

specifically the parts about:
helping small businesses
death tax abolishment becoming permanent (it exists only for tax year 2009 at the moment i believe)

the more i understand about dividend taxation, the more it makes sense to view it is 'double taxation' which i am not in favor of at all.

hopefully this will help get things going. we will see.

Midnyte_Ragebringer · Post by **Midnyte_Ragebringer** » January 7, 2003, 3:36 pm

You're arguement is typical of liberals. Try and detract from the issue at hand. Read Adex's post with the graph. The data verify the analogy. End of discussion. It's a simple god damned analogy, stop trying to derail it with you're nonsense.

Adex_Xeda · Post by **Adex_Xeda** » January 7, 2003, 3:39 pm

Until you can illustrate how Joe construction worker's $50 tax rebate is going to start a company your words aren't convincing.

Chidoro · Post by **Chidoro** » January 7, 2003, 3:43 pm

Until you can show me that tax benefits for the people who need it least show any benefit, your words hold no weight

Keep saying I'm liberal like it's profanity or something Mid, you just come off so stupid (and incorrect to boot). I'm middle class, I want the godamn rebate or cut. I don't have the residual income. What the fuck does any of that have to do with the people who need it most? Why are you so fucking thick?

Adex_Xeda · Post by **Adex_Xeda** » January 7, 2003, 3:44 pm

BTW the rich man's tax bracket that the Democrats want to rape are those above $90,000/year.

It doesn't take much to be considered rich by those who take your money by force.

Kylere · Post by **Kylere** » January 7, 2003, 3:46 pm

People that prove they can complete a biological function that EVERY OTHER LIVING THING ON THE PLANET can pull off, and they get a 3k tax cut.

I work my ass off, pick up 11 industry certifications, get a 20k pay raise, and 13K of it goes to taxes.

That is my single largest problem with taxes in the US. People that are too stupid to use birth control pay less money, my god that is bullshit, if they make a CHOICE to have kids, their is no reason other taxpayers should supplement their income. Bad enough I have to pay a ton of taxes to school their illbehaved, eminem worshipping brain dead offspring.

Adex_Xeda · Post by **Adex_Xeda** » January 7, 2003, 3:47 pm

I have the easier challege.

If I get 100k in tax relief AND I find out that my dividends aren't going to be double taxed I'm in MUCH better position to invest in our economy and create jobs.

Common sense is against you.

Chidoro · Post by **Chidoro** » January 7, 2003, 3:48 pm

Which Democrat said that? Use those l33t internet hunting skills to track it down.
Yes, I make more than 90k so I would be interested in reading this. No I'm very much not rich and am considered middle class in my neck of the woods

Edit: Who says I am not against the double tax? Common sense would point you to my argument and not a fabricated "liberal" one

Adex_Xeda · Post by **Adex_Xeda** » January 7, 2003, 3:48 pm

Look it up off that IRS link I provided.

Midnyte_Ragebringer · Post by **Midnyte_Ragebringer** » January 7, 2003, 3:53 pm

Chidoro wrote:Until you can show me that tax benefits for the people who need it least show any benefit, your words hold no weight

Keep saying I'm liberal like it's profanity or something Mid, you just come off so stupid (and incorrect to boot). I'm middle class, I want the godamn rebate or cut. I don't have the residual income. What the fuck does any of that have to do with the people who need it most? Why are you so fucking thick?

What the fuck does this have to do with the analogy?

Chidoro · Post by **Chidoro** » January 7, 2003, 3:58 pm

Because the analogy is wrong. It's flawed. It's incorrect in it's numbers.
That enough?

Midnyte_Ragebringer · Post by **Midnyte_Ragebringer** » January 7, 2003, 4:02 pm

Again I tell you to refer to the pie charts issued by the IRS that Adex posted.

Jesus, what is like being so thick?

Chidoro · Post by **Chidoro** » January 7, 2003, 4:03 pm

Ok, real simple
top 10 percent. I'm in it
I don't get back shit from this
The end

Midnyte_Ragebringer · Post by **Midnyte_Ragebringer** » January 7, 2003, 4:11 pm

/sigh

You just don't get it. The basis of the story is to show how a lot of people don't realize how good they have it.

Chidoro · Post by **Chidoro** » January 7, 2003, 4:16 pm

You don't get it. It's trying to incorrectly prove that more people have got it so good when, in fact, they don't.

Midnyte_Ragebringer · Post by **Midnyte_Ragebringer** » January 7, 2003, 4:17 pm

The richest of the rich pay the bigger share of taxes. Nuff said mental midget.

Chidoro · Post by **Chidoro** » January 7, 2003, 4:26 pm

Great, you simplified the argument into something that has nothing to do with what should be taken from each person's paycheck.
Were you such a simpleton all your life?

Deward · Post by **Deward** » January 7, 2003, 4:28 pm

Personally I believe in a national sales/use tax instead of income tax. I don't find it fair that I have to pay 5x what other people pay in order to use roads. I also think though that there is an incredible amount of waste that we could fix if we could elect politicians with some balls.

I have also seen, but can't quote, democrats that claim anyone making more than 100k is considered rich. That would be very comfortable for most parts of Wisconsin but I am sure there are many other states where that is barely a living wage. I wouldn't take a job in California (or most large cities) for 100k a year. By the time taxes were done, you would have hardly anything left.

Green party is the worst for wanting taxes. They want to tax the highest bracket 100% of their income. I find that so preposterous it stuns me. Right now my wife and I are in the 80-90k tax bracket. Come tax time I look for every loop hole I can find to try and keep some of the money that we worked damn hard for.

It's funny because in college I supported the Green party. Once I graduated and got a job and saw how bad the government steals from people then I switched to the Libertarians. I have seen several of my friends do the same.

Deward

Cartalas · Post by **Cartalas** » January 7, 2003, 4:38 pm

Kylere wrote:People that prove they can complete a biological function that EVERY OTHER LIVING THING ON THE PLANET can pull off, and they get a 3k tax cut.

I work my ass off, pick up 11 industry certifications, get a 20k pay raise, and 13K of it goes to taxes.

That is my single largest problem with taxes in the US. People that are too stupid to use birth control pay less money, my god that is bullshit, if they make a CHOICE to have kids, their is no reason other taxpayers should supplement their income. Bad enough I have to pay a ton of taxes to school their illbehaved, eminem worshipping brain dead offspring.

There is your problem maybe you should of been out having kids Kylere and you wouldnt have this problem.

Kylere · Post by **Kylere** » January 7, 2003, 4:43 pm

Of course the best system of taxation would be a flat tax with no exemptions, and no exceptions.

I read a book once ( and I cannot remember the author or title for the life of me) where they used a citizen assigned taxation value, basically you paid your taxes, and 20% of each citizens taxes went into a government general fund. Then the other 80% was assigned by each taxpayer based on picking the division they choose to make among government departments. An example would be 30% to defense, 20% to research/research grants, 20% to infrastructure ( federal roads, canals etc), 5% to federal law enforcement, 15% to Education, 10% to NASA.

Kylere · Post by **Kylere** » January 7, 2003, 4:46 pm

Cartalas wrote:
Kylere wrote:People that prove they can complete a biological function that EVERY OTHER LIVING THING ON THE PLANET can pull off, and they get a 3k tax cut.

I work my ass off, pick up 11 industry certifications, get a 20k pay raise, and 13K of it goes to taxes.

That is my single largest problem with taxes in the US. People that are too stupid to use birth control pay less money, my god that is bullshit, if they make a CHOICE to have kids, their is no reason other taxpayers should supplement their income. Bad enough I have to pay a ton of taxes to school their illbehaved, eminem worshipping brain dead offspring.
There is your problem maybe you should of been out having kids Kylere and you wouldnt have this problem.

Opportunity exists, desire to does not. but the fact remains I should not pay for the lifestyle decisions of others, they choose to have kids, no one is forced to do so any more than I am forced to buy a car or a house.

Voronwë · Post by **Voronwë** » January 7, 2003, 4:51 pm

i'm sure you didnt benefit from one tax dollar in your ascent from infancy.