An email I just got says the following....

How Taxes Work


The author of the following article is: Thomas L. Davies, LL.M., M.P.A.,
C.P.A., Professor and Chairman of the University of South Dakota School of
Business, Accounting and Business Law Division.
(In South Dakota, it is obviously too cold to play outside. You don't see
stuff like this coming from any warm-weather area educator.)

You might like this....

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, "but he,"
pointing to the tenth, "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
cannot seem to grasp this rather straight-forward logic!

T. Davies
Professor of Accounting & Chair,
Division of Accounting and Business Law
The University of South Dakota
School of Business
414 E. Clark Street
Vermillion, SD 57069


Subject: Taxes

When NASA first started sending up astronauts, they quickly discovered
that ball-point pens would not work in 0 gravity. To combat this problem,
NASA scientists spent a decade and $12 million developing a pen that writes
in zero gravity, upside down, underwater, on almost any surface including
glass and at temperatures ranging from below freezing to over 300 C.

The Russians used a pencil.

Enjoy paying your taxes.


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