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# Xinyuan Real Estate Co., Ltd. Message Board

• rob_nd rob_nd Nov 4, 2012 1:46 PM Flag

## Romney's plan is to cut taxes by 20% across the board . . .

Here is an explaination of our tax system that most people will 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 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 beer by \$20.' Drinks for the ten 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 by roughly the same amount, 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 pay \$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 \$49 instead of \$59 (16% 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 \$10!'

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

'That's true!!' shouted the seventh man. 'Why should he get \$10 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 something important. They didn't have enough money between all of them for even half of the bill!

And that, ladies and gentlemen, 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 overseas where the atmosphere is somewhat friendlier.

David R. Kamerschen, Ph.D. Professor of Economics University of Georgia

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• As a student of Georgia Tech I say "TO HELL WITH GEORGIA"

• romney is a RELIGIOUS NUT CASE

• A cop or fireman or teacher can work in a job for a lifetime without worry of being fired. A CEO has to produce or they will be fired. It is a 24 hour a day 7 day a week job. Now I do agree that not all CEOs are worth what they are paid, but I think the job of a CEO requires a level of constant steady production and leadership that is not expected of the average worker.

That example's really well written, but there's one thing it glosses over: drinking's voluntary, paying taxes is mandatory.

The real world analogy for guy number 10 not showing up at the bar is that he would have to stop paying his taxes, a practice that could get him thrown in the hoosegow.

Skip a night out with your buddies and nobody's the wiser, but stop paying your taxes and the IRS / DOJ will eventually come looking for you.

• 2 Replies to hmmm26
• Hmmmm- I did not write this. Got it in an email a long time ago and resurrected it.

Time and again you show the lawyer background - very analytical. You are right about drinking and taxes being different. However, the story's main goal is to point out that if you cut taxes, those who pay more will realize a larger dollar amount of savings, but that this does not mean they get preferential treatment.

In addition, it is supposed to show that high income earners contributions to society in the form of high taxes is never realized by the majority of society. One way it would be noticed is if the rich just quit (as in Atlas Shrugged - I am not an Ayn Rand fan).

• Have you asked yourself why a PHD would resort to a story instead of providing concrete analysis?? Does he think we're too stupid to understand anything but a simple minded story??

• You are a testament to the failure of our educational system with your simple minded example. I wonder how a #\$%\$ like you could get a Ph.D. The first thing that is wrong with your stupid example is that many people pay payroll taxes even though they don't pay income taxes. Another problem with you simple minded fairy tale is that it doesn't account for the fact that the top 2% got 93% of the income gains in the last 30 years. The top rate has been cut from 70% to 35% over the last 30 years. Capital gains and dividend taxes have been cut. Willard romney paid 14%!!! ENOUGH IS ENOUGH!!!!

• 2 Replies to walrathcrai
• I can't take credit for the above. I am not Mr. Kamerschen. However, it is very applicable to the U.S. today. As taxes rise, the rich have no motivation to work harder and earn more because the government will just take it away. When taxes go up, government revenue goes down. That has been the case ever since taxes were first instituted.

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