Urban Legends debunker snopes.com claims that this is not attributable as of yet, but it is very informative.
www.snopes.com/business/taxes/howtaxes.asp As of 27 May 2011
At the very end, this turns into a Herman Cain campaign add, with the line "Herman Cain’s Fare Tax proposal..." Of course we all realize that while Herman Cain is a neat guy, and an extremely viable candidate for President -- the "Fair" tax proposal is many years older than Cain's Presidential aspirations.
And now, after all my Blathering -- here's the text of "Bar Stool 101" Economics for the alcoholically challenged.
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Suppose that every day, ten men go out for beer 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 drank in the bar 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 beer by $20."
Drinks for the ten 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 - 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 drink his beer. So, the bar 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, 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).
Each of the six was better off than before. And the first four continued to drink 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 I!"
"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!" 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 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 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 drinking overseas where the atmosphere is somewhat friendlier.
(Authorship denied by several folks including David R. Kamerschen, Ph.D.
a Professor of Economics, University of Georgia )
For objective federal tax info: http://www.taxfoundation.org/news/show/250.html (Last year, the top 10% of wage earners paid nearly half of all taxes. The bottom 50% paid almost no taxes!
The fact is that “the rich” who make their income solely from investments rather than “salary” (i.e. Warren Buffet paid less than 18% vs. his secretary and other employees paid between 33-41%: http://www.cbsnews.com/stories/2011/09/19/earlyshow/main20108139.shtml) do pay a lower tax rate on that income (capital gains tax of ~18% vs. up to ~40%). However, at least theoretically, the “rich” paid taxes on that money when they made it in the first place. The US has just about the highest top federal tax rate on its wealthiest citizens and corporations (both ~35%). Some state corporate tax rates are as high as 10%. Some state income tax rates are as high as 10%. So theoretically, if you own a corporation, you may pay up to 45% of your profits in taxes, then may pay another 45% of your salary in taxes…but you are still not paying your fair share according to our president…even though nearly half of our citizens pay no net federal income tax! So, theoretically, if you’re “rich” as much as 90% of the money you made went toward state & federal taxes…and don’t forget about city and state sales taxes, property taxes, etc.?
Herman Cain’s Fare Tax proposal – 9% Income Tax, 9% Corporate Tax, & 9% Federal Sales Tax -- no matter how much you make… (Exempt groceries from the sales tax?) That seems to allow us all to pay our “fare share”. No more loopholes for “the rich” and no more freeloading from “the rest”. All of us, individually, city, state, federal governments, should live within our means and not spend more than we are making…or live off of other citizens.
