How Taxes Work

Ok, I'm sure many people here have come across this at some point.
This really paints an accurate picture of how our taxes work.

Let's just say that the very much hated "big oil" companies happen to be the 10th man in this analogy.
What's going to happen if decides to leave (outsource) before the other 9 men beat him to a pulp?


If you don't agree with this explain where and why this is flawed.

If there is a better analogy out there, please share.

How Taxes Work
This is a VERY simple way to understand the tax laws. Read on it does make you think!!

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,
and 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 (in tax language a tax cut).

"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 $80.00.

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 who 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, a little late what was very important. They were FIFTY-TWO DOLLARS short of paying the bill! Imagine that!

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.

Where would that leave the rest? Unfortunately, most taxing authorities anywhere cannot seem to grasp this rather straightforward logic!

Too bad this isn't reality. The poor really don't get a free lunch, because sales taxes are a flat tax and are paid by everyone.

A more likely analysis, is that the first one pays $3, the next pays $6, and the next six, called the middle class, pay $12. The ninth is upper middle class, and he pays $15. The tenth and richest is friends with the owner, and although he demands the best food and finest drink, only pays $4.

Then the tax breaks comes around... for the rich only - $20. Everyone else still pays the same, but the owner now gives the rich $16 (ie. subsidies) for having him come to his place and bring his 9 buddies (which they really aren't), and then reduces the size of everyone's meal to compensate. If the rich guy's middle class buddies complain, he threatens to fire them, so they keep on doing it, even though it is unfair.

Bush's tax cuts weren't equitable - they are for the elite only.
Remember that.

Ok, but what about the taxes big oil companies pay?

According to CNN, Exxon Mobil once again reported the largest quarterly profit in U.S. history Thursday, posting net income of $11.68 billion on revenue of $138 billion in the second quarter.
That profit works out to $1,485.55 a second.

Buried in the story we also find that "In addition to making hefty profits, Exxon also had a hefty tax bill. Worldwide, the company paid $10.5 billion in income taxes in the second quarter, $9.5 billion in sales taxes, and over $12 billion in what it called 'other taxes.'"

link

reply to post by Alxandro


Which means 4th of their profits goes to all their taxes, and as a single in NYC i pay more then 3rd of my pay check only(that is not including different taxes when i go shopping for food and clothes).

Althought this analogy is pretty good, it doesn't do much justice because we don't have dollar amount regarding how much each of the ten people earn. Taxes are all bracket based, you can think of them as percenteges of your income. The poor pay the smallest percent. The rich pay the highest percent. By reducing the percentage across the board OFCOURSE the rich are going to recieve the highest tax cut when looking at a fixed dollar amount.

-The poor will always complain about being poor, although I don't feel they all deserve this right as most of the poor people I know CHOOSE to be poor. No work for them, they would rather collect welfare, food stamps, disability, section 8, unemployment, workers comp..etc...etc...etc....They earn the least. They benifit the least from tax cuts. They benefit the most from government subsidized aid, and increases in the minimum wage. I hate to make a sweeping generalization but the poor is a leach on our society, minus the few who don't have good jobs for legitimate reasons.

-The middle class will always complain about the poor, and the rich. Middle class sees the poor obtain most of life style they have, with much less effort. Middle class sees rich benifit from their hard work. Middle class is bitter because their medium percentage of taxes goes to pay for the poor, while their hard work goes to support the extravagent life styles of the rich.

-The rich(upper, upper classes) has it made. While they bitch and moan about higher taxes(because they are greedy, possibly a good reason why they are rich) these higher taxes don't really hurt the wealthy because it is a drop in the bucket. Even if we are looking at paying the highest percentage of taxes, and highest dollar amount. The wealthy still doesn't even flinch.

May I recomend less benifits for the poor and more taxes for the rich?

I'm sure you can guess what bracket I fall into.

Remember 90% of the worlds wealth is controlled by 1% of the population.

Originally posted by prestonberryworth

-The middle class will always complain about the poor, and the rich. Middle class sees the poor obtain most of life style they have, with much less effort. Middle class sees rich benifit from their hard work. Middle class is bitter because their medium percentage of taxes goes to pay for the poor, while their hard work goes to support the extravagent life styles of the rich.

-The rich(upper, upper classes) has it made. While they bitch and moan about higher taxes(because they are greedy, possibly a good reason why they are rich) these higher taxes don't really hurt the wealthy because it is a drop in the bucket. Even if we are looking at paying the highest percentage of taxes, and highest dollar amount. The wealthy still doesn't even flinch.

Remember 90% of the worlds wealth is controlled by 1% of the population.

Survival of the fittest is a vicious cycle and you must keep or expect to get rolled over.
In the animal kingdom, the bigger stronger animal (upper class) will devour a medium sized animal (middle class), thus leaving scraps for the smaller animals (poor) to munch on.
If you kill off the big animals, the smaller animals may never be able to eat again and may even be eaten by the NEW king of the jungle, then the cycle starts over.

reply to post by Alxandro


I really liked your post Alxandro. I think that's a pretty accurate way to represent the system.

To cannonfodder who said that it doesn't accurately represent the sales tax which poor people pay, as you said the sales tax is a flat tax, which means that the rich are paying this tax as well. But the problem is that the rich buy many more expensive things while the poor buy many fewer and cheaper things so they are still paying much much less than the rich in sales tax. Seems pretty equitable to me.

Here's a thought. Instead of increasing taxes on any group, cut spending!

Ok, but what about the taxes big oil companies pay?



They don't pay taxes....you do in the price of gas.
All business roll there tax on to the cost of the product.
The comsumer pays all taxes.

Originally posted by Pinktip
Ok, but what about the taxes big oil companies pay?

 

They don't pay taxes....you do in the price of gas.
All business roll there tax on to the cost of the product.
The consumer pays all taxes.

A star for you! Somebody finally gets it. No matter what the cost, the big corporations will ALWAYS make the maximum profit margin. They always use this to explain why they need illegal labor. If they had to play by the rules, their product would cost more. Why? Because they can NEVER ACCEPT LESS THAN THE MAXIMUM PROFIT MARGIN. COSTS MUST BE PASSED ON TO THE CONSUMER.

reply to post by Pinktip


Well I certainly don't remember ever signing their 1040 forms, that's for sure.