Tax cuts For The Rich

This morning I felt the urge to do my part in keeping a bit of urban legend going.  First let me acknowledge, I got the piece in an email from a friend.  Even though the article does a splendid job of exposing how tax cuts affect different economic groups, it had an attribution that I felt could be questioned.  

My first move was to quickly consult the sometimes unreliable fact authority known as Snopes.  To their credit, they had no comment on the accuracy of the article's content but did conclude that the original author was unknown and that several versions of attribution were found to be inaccurate.

All that having been said, who cares if the author is unknown.  Some pretty well known books fall into that category.  Who can say, with any concrete certainty, who the real authors of the Gospels were.  Enough dancing around the edges already, lets get to the story.  Here it is:

THE TAX SYSTEM EXPLAINED IN BEER
             by a Professor of Economics

Cast of characters:  Ten men who drink beer
Local: a local bar where the men regularly gather

Suppose that 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 drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve ball. "Since you are all such good customers," he said, "I'm going to reduce the cost of your daily beer by $20". Drinks for the ten men 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 drink for free. But what about the other six men ? 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 drink his beer.

So, the bar owner suggested that it would be fair to reduce each man's bill by a higher percentage the poorer he was, to follow the principle of the tax system they had been using, and he proceeded to work out the amounts he suggested that each should now pay.

     And so the fifth man, like the first four, now paid nothing
   (100% saving).
   The sixth now paid $2 instead of $3 (33% saving).
   The seventh now paid $5 instead of $7 (28% saving).
   The eighth now paid $9 instead of $12 (25% saving).
   The ninth now paid $14 instead of $18 (22% saving).
   The tenth now paid $49 instead of $59 (16% saving).

Each of the six was better off than before. And the first four continued to drink for free. But, once outside the bar, the men began to compare their savings.

"I only got a dollar out of the $20 saving," 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 benefit than me!"

"That's true!" shouted the seventh man. "Why should he get $10 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. This new tax system exploits the poor!"

The nine men surrounded the tenth and beat him up.

The next night the tenth man didn't show up for drinks, so the nine sat down and had their beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!

And that, boys and girls, journalists and government ministers, is how our tax system works. The people who already pay the highest taxes will naturally 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 drinking overseas,  as many are considering where the atmosphere is somewhat friendlier.
       

        [author unknown]Ph.D.

        Professor of Economics.

For those who understand, no explanation is needed.  For those who do not understand, no explanation is possible.  For me, I really liked the John Galt ending.  If you ask, who is John Galt, then re-read the two preceding sentences.

An Open Letter To Newt Gingrich

Newt, you lit a fire storm with your recent debate remarks on immigration.  Just as you and the other candidates have put flesh on the bones of economic policy, the same should be done here. 





I see the whole problem as two main issues: 

• what to do with those already here illegally and 
• what to do to keep more from coming here illegally. 

First we should deal with the latter.

The INS is ineffective.

We can build fences, fly drones, run gun boats and all other kinds of interdiction and should, but not before dealing with what causes so many to risk life to get here and just become a good citizen. They do it because our Federal bureaucratic INS is ineffective. For a Latino to apply for and get a work visa takes years. They want to feed their family and can't wait years nor should they have to.

Fix the problem.

If we turned that whole process over to a private company that would take submissions from U.S. employers for their need for workers and then match them with applications for work visas, they could probably do the matching and vetting of an migrant worker in a few weeks.

The migrant worker would have a worker identification card, a U.S. address and place of employment and could be monitored. Their employment would be one at will, that is, termination by either party would not require any cause and on that event they would be required to return to their mother country.

They would earn no credits for social security, get no social services and pay local state and federal taxes. Nor could they bring their family here other than they go through the same procedure. No pregnant women would be allowed. Pregnancies occurring once here would be a separate issue to solve. Perhaps on discovery and before birth, they would be required to return to their mother country. The path just described would be just for those wanting to come here for work and not as immigrants for citizenship.

The path to citizenship-

A path to citizenship would take a similar but different form and would have stricter requirements on vetting and time to gain immigrant status. This path could be done in conjunction with the work path. That is, they could get here quickly to work while their processing for a citizenship immigration path was taking place. If after a set waiting period requiring proof of good conduct they are not accepted for immigration status, they must return to their mother country.

How about those already here?

Now, what is to be done with those already here. For those here less than a year and no infant citizenship involved, they must return to their mother country and apply for the work permit or immigration permit path.

For those here longer and having been law abiding, tax paying productive aliens they would be required to declare their intentions, work or immigration paths. If they had not met the requirements mentioned they must leave the country, family or not. Eligible aliens would not be required to leave the country but would have a temporary I.D. and work permit issued while the normal entry processing was taking place. Until a Constitutional amendment can be accomplished, some rules regarding pregnancies need to be established.

Those declaring intent for citizenship would not gain it immediately and would be required to wait the standard waiting period with some years tacked on for having been here illegally in the first place before gaining citizenship. Before that time no voting privileges would be granted.

Put your mind to the task.

There are obvious holes in what I have proposed but with some thought given by folks more adept at rule making than me, the particulars could be worked out.

In summary:

• First fix the work permit waiting time and establish a tracking system.
• Secondly, and only after the first is dealt with, deal with those already here.

What could we expect?

The effect would be to dramatically cut down illegal border crossings by honest intentioned aliens that would then leave only the few real threats to discover and prevent. Those coming in legally would not displace American workers as companies would have to show they had a need for alien workers before an alien would be granted a work permit. And having done so, they could while working here, live here in the open unafraid of our laws. During this whole immigration debate or problem solving, the word amnesty would be abolished as it has been poisoned to the extent it clouds a clear thinking mind. Its mere mention, has an emotional effect of freezing a willingness to solve the problem.

Course of action -

Don't do the political walking back dance on this one. You took the right bold step. Now provide, in your typical fashion, a candid plan the American people can understand. If you do they will support you.