Contour Enthusiasts Group Archives Forums General Common Interests So, How Do Taxes Work?

As a person who just did their 2005 1040 I can so relate..........


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!

-Unknown author

Sounds logical enough to me!

Unfortunately, when the portions are divvied up differently because one has children and all the other factors that our system has... that's when it gets muddier.

Too simplistic. There is a lot more involved and a lot of the times the richest person gets paid to eat anyway.

that explained the federal tax rates perfectly. A tax break benefits those who make more money more then it would benefit those who make less. a 1% break to a person who makes 40k a year isnt as much as a 1% break to someone who makes 100k a year. thats common sense. but if you look at it closely, it breaks out to be an even ratio of gross pay to net pay.

All I know is that when I changed jobs and saw my salary drop by $10K, my net take-home stayed essentially the same because the salary cut put me into a lower tax bracket. It was pretty funny because we'd been steeling ourselves for the lower income level, and then the first new paycheck came.

Charitable contributions are definitely a good thing, but your tax bill should not change because of them.

I completely agree, IF and ONLY if we get some sort of "flat tax" code put in place.

Otherwise, the "business as usual" model will suit me fine as I have little choice but to financially protect myself any way I can and more of my money and investments will continue to move out of the US due to the complete screwing that I get if I cash out of stocks too early, take any sort of financial gain off of real-estate, etc., etc.

There are much worse places to try and make money, but the ongoing tax crunch that the entire middle-class and lower upper-class have been subjected to here in the US is nothing short of paycheck and investment gang-rape by the government...