Wednesday, June 07, 2006

Blogging Myself Out of A Job

This is one of those e-mails that are forwarded around all the time. I never forward these things myself, but I receive plenty of them, and occasionally I read them. This one I actually liked for fairly obvious reasons. You may have all seen this already, but if not, check it out. It is pretty interesting, and kind of funny. But first, a tax cartoon to lighten everyone's spirit:

Sometimes politicians, journalists and the liberal left exclaim; "It's
just a tax cut for the rich!" and it is just accepted to be fact. But
what does that really mean?

Let's put tax cuts in terms everyone can understand.

Suppose that every day, ten men go out for dinner 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 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." Dinner 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 eat 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 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, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33% savings).
The seventh now paid $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 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 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 me!"

"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 dinner, so the nine sat
down and ate 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, boys and girls, 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
eating overseas where the atmosphere is somewhat friendlier.

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

I thought that was pretty entertaining.

For further interesting tax reading I recommend Flat-Tax Revolution by Steve Forbes. It was a really interesting book and I am really behind the idea of a flat tax. I'm not sure that all of the kinks are completely worked out in the Flat Tax proposal, but I think its darn close and the more support it can garner the better. The book is written in total layman's terms, so it doesn't come across as boring to the average reader. My point, you do not have to be a tax accountant to read it. You just need to be an American who pays taxes.

While I am completely smitten with the idea of a flat tax, I plan to read both more literature on the flat tax and more about some of the opposing ideas.

One popular opposing idea is exemplified in The FairTax Book by Neal Boortz and John Linder. I'm not crazy about the idea of a national sales tax, but I want to be fair in my research and read all the ideas on the table.