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The Tax Story

IP: * 02.05.03, 00:02
Tax Cuts Don't Resonate With Nontaxpayers
Published: Apr 27, 2003

My thanks to Scott A. Hodge, executive director of the Tax Foundation, for
passing along this little story.
Suppose that every day, 10 men went out for dinner. The bill for all 10 came
to $100. They decided to pay their bill the way we pay our taxes, so they
divided the bill like this:

The first four men - the poorest - would pay nothing. The fifth would pay
$1, the sixth $3, the seventh $7, the eighth $12, the ninth $18, and the
10th man - the wealthiest - would pay $59.

One day the restaurant owner threw them a curve (in tax language, a tax

``Since you are all such good customers,'' he said, ``I'm going to reduce
the cost of your daily meal by $20.''

Continuing To Eat For Free

The group still wanted to pay the 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 would 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 at the restaurant owner's suggestion, they arrived at this new
distribution: The fifth man paid nothing, the sixth pitched in $2, the
seventh paid $5, the eighth paid $9, the ninth paid $12, leaving the 10th
man with a bill of $52 instead of his earlier $59. Each of the six was
better off, 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, then, pointing
to the 10th. ``But he got $7!'' ``Yeah, that's right,'' exclaimed the fifth
man. ``I only saved a dollar too. It's unfair that the wealthy get all the

``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 10th 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 $52 short of paying the bill.

The lesson here is one that congressional opponents of President Bush's
efforts to reduce income taxes well understand. But for political reasons
they have chosen to engage in class warfare, deliberately misleading their
constituents with speeches decrying administration tax policies that ``favor
the rich.''

A Generally Unspoken Aspect

But if we are to cut taxes and thereby stimulate the economy (as Kennedy and
Reagan so successfully did), we must cut the taxes of the people who pay
taxes in the first place. And this year 35.8 million tax filers
(representing 69.6 million people) will pay no federal income taxes at all.
That's 26.7 percent of the 133 million tax returns the government expects
will be filed in 2003.

Ironically had Congress adopted the president's original tax-reduction plan,
millions of additional Americans would have been freed of any and all income
tax liability.

Surely lower federal taxes are welcomed by the majority of people who pay
taxes, but most of the solons on Capitol Hill opposing the Bush plan are
catering to folks who, perhaps because of adversity, don't pay their way.
They rate kindly concern, even as those who pay the freight deserve a break.

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