Here is a brilliant description of how our[Aussie] tax system works, > probably applies to everyone in a western country as well. > > Subject: HOW OUR TAX SYSTEM WORKS! (By a Professor of Economics) > > Folks, I was having a chat recently to an employee I admire, and he > happened > to mention that he thought John Howard is out of touch with the people's > needs. Now this is one of the very few true democracies in the world, > and > he is certainly free to have that opinion. However, there is an > election > coming up later this year, and most of us will have to decide who should > be > our Prime Minister...a Labour Party PM or a Liberal Party PM. > > It is common knowledge that the Labour Party voters come from lower > socio-economic groups, academics, union members and some greens. The > Coalition led by the Libs are supported predominantly by small to medium > business, mid to high-range income earners, and some large businesses. > > Basically, this is so because one group are 'givers' and the other group > are > 'takers', and before you decide which group you are in and who that > group > votes for, I thought you may like to read this explanation below on our > tax > code, which perhaps could assist you decide if John is out of step with > you, > or just out of step with the non-producing, winging other half. > > "Taxing the People" Explaining Taxation ... > > When explained like this, it is much easier to understand our current > tax > code and why the coalition is trying to reform it. Remember, a serious > tax > cut is proposed by the coalition in the next budget. Remember too that > the > State governments promised to abolish most state taxes including payroll > tax, stamp duty and property tax in exchange for obtaining the GST > revenue, > but despite windfall amounts of GST and a booming property market, our > Labour State Governments have not only not abolished those taxes, they > have > not invested these funds into our infrastructure either. Consequently, > our > roads are a shambles; law and order would be a laugh if it were not such > a > serious subject; water supply is in diabolical shape; our Hospitals are > a > disgrace; and our power supply is in crises. > > 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? Just in case you are not completely clear on this > issue, I > hope the following will help. Please read it carefully. 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." Following the > reduction, dinner for the ten would 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: > > * 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... the least > proportionate savings) > > Each of the six paying customers 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!" > > As a consequence, the first 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 among 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 >
