our tax system

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
>