Why tax cut's do not actually favor the rich

Recently I stumbled upon this analogy for our tax system explained in simple terms written by Dr. David R Kamerschen a Professor of Economics at the University of Georgia.

“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:
a. The first four men (the poorest) would pay nothing
b. The fifth would pay $1
c. The sixth would pay $3
d. The seventh would pay $7
e. The eighth would pay $12
f. The ninth would pay $18
g. The tenth man (the richest) would pay $59 ... ratios from our existing tax system

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." Dinner 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 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 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:

a. The fifth man, like the first four, now paid nothing (100% savings)
b. The sixth now paid $2 instead of $3 (33% savings)
c. The seventh now paid $5 instead of $7 (28% savings)
d. The eighth now paid $9 instead of $12 (25% savings)
e. The ninth now paid $14 instead of $18 (22% savings)
f. 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 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 savings 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!"

The 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 between all of them for even half of the bill!”

While this explains our system in a humorous way the message is anything but. When ever there is a story on the news about some politician who supported “tax cuts that favor the rich” it is simply a spin put on the story to attract more viewers. In truth tax cuts favor the poor, as do taxes. Being economically conservative I believe in a fair and flat percentage tax system for everyone who makes more than a certain amount, so when I hear stories about tax cuts favoring the rich I feel that people really need to be enlightened about who our system really favors. It is a classic move to gain votes, tell the poor that the current system favors the rich and that you plan to fix the system. After all as human beings we are more than happy to place the blame for our own problems on anyone else. So when a politician comes around and says it is the fault of those with more that you have less, as humans we happily let ourselves be fooled into this false notion and place our vote behind the so called reformer.