Tuesday, March 09, 2004
Economics
How do tax cuts work?
Sometimes Politicians can 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 people 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 people (the poorest) would pay nothing
The fifth would pay £1
The sixth would pay £3
The seventh pays £7
The eighth £12
The ninth £18
The tenth person (the richest) pays £59
So, that's what they decided to do.
The ten people ate dinner in the restaurant every day and seemed quite happy with the arrangepeoplet, 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 people 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 people realised that £20 divided by six is £3.33. But if they subtracted that from everybody's share, then the fifth person and the sixth person would each end up being 'PAID' to eat their meal.
So, the restaurant owner suggested that it would be fair to reduce each person's bill by roughly the same amount, and he proceeded to work out the amounts each should pay.
And so:
The fifth person, 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 people began to compare their savings. "I only got a pound out of the £20," declared the sixth person and pointed to the tenth person "but she got £10!" "Yeah, that's right," exclaimed the fifth person. "I only saved a pound, too. It's unfair that she got ten times more than me!" "That's true!!" shouted the seventh person. "Why should she get £10 back when I got only £2? The wealthy get all the breaks!"
"Wait a minute," yelled the first four people in unison. "We didn't get anything at all. The system exploits the poor!"
The nine people surrounded the tenth person and beat her up.
The next night the tenth person didn't show up for dinner, so the nine sat down and ate without her. But when it came time to pay the bill, they discovered that they didn't have enough money between them for even half the dinner bill!
And that, taxpayers, journalists and college professors, 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. There are plenty of good restaurants in the Caribbean.
Sometimes Politicians can 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 people 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 people (the poorest) would pay nothing
The fifth would pay £1
The sixth would pay £3
The seventh pays £7
The eighth £12
The ninth £18
The tenth person (the richest) pays £59
So, that's what they decided to do.
The ten people ate dinner in the restaurant every day and seemed quite happy with the arrangepeoplet, 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 people 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 people realised that £20 divided by six is £3.33. But if they subtracted that from everybody's share, then the fifth person and the sixth person would each end up being 'PAID' to eat their meal.
So, the restaurant owner suggested that it would be fair to reduce each person's bill by roughly the same amount, and he proceeded to work out the amounts each should pay.
And so:
The fifth person, 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 people began to compare their savings. "I only got a pound out of the £20," declared the sixth person and pointed to the tenth person "but she got £10!" "Yeah, that's right," exclaimed the fifth person. "I only saved a pound, too. It's unfair that she got ten times more than me!" "That's true!!" shouted the seventh person. "Why should she get £10 back when I got only £2? The wealthy get all the breaks!"
"Wait a minute," yelled the first four people in unison. "We didn't get anything at all. The system exploits the poor!"
The nine people surrounded the tenth person and beat her up.
The next night the tenth person didn't show up for dinner, so the nine sat down and ate without her. But when it came time to pay the bill, they discovered that they didn't have enough money between them for even half the dinner bill!
And that, taxpayers, journalists and college professors, 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. There are plenty of good restaurants in the Caribbean.
Monday, March 08, 2004
Mr SIMM has reached Chicago
After a few months in America he is ready to leave on a plane from O' Hare airport
Florida was nice but it is good to be on the move again.
Map
Florida was nice but it is good to be on the move again.
Map
Thursday, March 04, 2004
Video
Wednesday, March 03, 2004
Weather camera
Updated 4 times a minute, click on the picture for the current view
Control it here or here. The username is guest and the password is guest
Control it here or here. The username is guest and the password is guest
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