## It’s not fair

20/01/2010

The report of the Tax Working Group was still warm from the printer when the usual suspects started saying, “It’s not fair, the rich benefit most from tax cuts.”

They do for the simple reason they pay more in the first place. I’ve yet to find a better illustration of that fact than this fable which has been circulating by email for years.

Let’s put tax cuts in terms everyone can understand. Suppose that every day, ten people went out for dinner. The bill for all ten came to \$100. If they paid their bill the way we pay our taxes, it would go something like this:

The first four — 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 diner— the richest — would pay \$59.

That’s what they decided to do. The ten diners ate in the same 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,” she 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 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 remaining diners realised that \$20 divided by six is \$3.33. But if they subtracted that from everybody’s share, the fifth and sixth  diners would end up being paid to eat their meal. So the restaurant owner suggested that it would be fair to reduce each diner’s bill by roughly the same amount, and she proceeded to work out the amounts each should pay.

And so the fifth diner paid nothing, the sixth pitched in \$2, the seventh paid \$5, the eighth paid \$9, the ninth paid \$12, leaving the tenth with a bill of \$52 instead of the 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 diners began to compare their savings. “I only got a dollar out of the \$20,” declared the sixth who pointed to the tenth. “But he got \$7!”

“Yeah, that’s right,” exclaimed the fifth, “I only saved a dollar, too . . . It’s unfair that she got seven times more than me!”.

“That’s true!” shouted the seventh, “why should she get \$7 back when I got only \$2? The wealthy get all the breaks!”

“Wait a minute,” yelled the first four diners in unison, “We didn’t get anything at all. The system exploits the poor!”

The nine diners turned on the tenth and accused her of being greedy. The next night she didn’t show up for dinner, so the nine sat down and ate without her. But when it came time to pay the bill, they discovered, a little late, they were \$52 short of paying the bill!

And that 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. There are lots of good restaurants in other places which tax less.

Where would that leave the rest who can’t afford to go there for dinner?

This is of course simplistic. It doesn’t take into account their are taxes other than income tax, like GST, which everyone regardless of their income pays.

But wealthier people have more disposable income which means they usually consume more and pay more consumption tax too.

## Hold Me, Touch Me

20/01/2010

Happy birthday Paul Stanley, 58 today.

## George Burns hosts Muppet Show

20/01/2010

George Burns would have been 114 today.

## Summer was there but now I’m here

20/01/2010

Wanaka was basking under a cloudless sky and enjoying a lovely 26 degrees when I left at 2 yesterday afternoon.

North Otago skies were cloudy and it was only 16 degrees when I got home 2 1/2 hours later.

It tried to rain overnight and we woke to a cool, misty morning.

Summer was there, but now I’m here in two layers of merino.

Sigh.

## Water’s running out

20/01/2010

Meridian Energy is spilling water from the Waitaki dams – Benmore, Aviemore and Waitaki – becasue the hydro lakes are too full.

The water pouring over the Waitaki Dam reminded me that Federated Farmers keeps reminding us our problem isn’t that New Zealand is running out of water but that the water is running out of New Zealand.

When we’ve got this much water rushing out to sea, what’s the problem with harvesting some for irrigation, power generation and recreation?

## January 20 in history

20/01/2010

On January 20:

• Emperor Decius began a widespread persecution of Christians in Rome. Pope Fabian was martyred.
• 1265 In Westminster, the first English parliament conducts its first meeting held by Simon de Montfort in the Palace of Westminster.

1356 Edward Balliol abdicated as King of Scotland.

1523 Christian II was forced to abdicate as King of Denmark and Norway.

1649 Charles I of England went on trial for treason and other “high crimes”.

1788 The third and main part of First Fleet arrived at Botany Bay. Arthur Phillip decided that Botany Bay is unsuitable for location of a penal colony, and decides to move to Port Jackson.

1840  Dumont D’Urville discovered Adélie Land, Antarctica.

1840 – Willem II became King of the Netherlands.

1841  Hong Kong Island was occupied by the British.

1885  L.A. Thompson patented the roller coaster.

Thompson’s Switchback Railway

1887  The United States Senate allowed the Navy to lease Pearl Harbor as a naval base.

1892  At the YMCA in Springfield, Massachusetts, the first official basketball game was played.

The first basketball court: Springfield College.

1896  George Burns, American actor, comedian, was born.

1899  Clarice Cliff, English ceramic, was born.

1910 Joy Adamson, Austrian naturalist and writer, was born.

1921 The first Constitution of Turkey was adopted, making fundamental changes in the source and exercise of sovereignty by consecrating the principle of national sovereignty.

1926 Patricia Neal, American actress, was born.

1929  In Old Arizona, the first full-length talking motion picture filmed outdoors, was released.

1930  Buzz Aldrin, American astronaut, was born.

1934  Tom Baker, British actor, was born.

1936  Edward VIII became King of the United Kingdom.

1937 Franklin Roosevelt was inaugurated for a second term as President of the United States. This was the first inauguration scheduled on January 20, following adoption of the 20th Amendment. Previous inaugurations were scheduled on March 4.

1950  Liza Goddard, British actress, was born.

1952 Paul Stanley, American musician (Kiss), was born.

1957 Scott Base opened in Antarctica.

1959 The first flight of the Vickers Vanguard.

1960 Hendrik Verwoerd announces a plebiscite on whether South Africa should become a Republic.

1961  John F. Kennedy is inaugurated as the youngest man, and first-ever Roman Catholic, to become elected President of the United States.

1965   Sophie, The Countess of Wessex, was born.

1981 Irann released 52 American hostages twenty minutes after Ronald Reagan was inaugurated as U.S. President, the oldest man to be inaugurated at 69.

1987  Church of England envoy Terry Waite was kidnapped in Lebanon.

1990  Black January – crackdown of Azerbaijani pro-independence demonstrations by Soviet army in Baku.

Soviet tanks in Baku during Black January.

1991 Sudan‘s government imposed Islamic law nationwide, worsening the civil war between the country’s Muslim north and Christian south.

2001  Philippine president Joseph Estradawas ousted in a nonviolent 4-day revolution, and was succeeded by Gloria Macapagal-Arroyo.

2009 Barack Obama was inaugurated as the 44th President of the United States of America – the United States’ first African-American president.

Sourced from NZ History Online & Wikipedia.