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Tag: tax

Why Punitive Taxes On Those Who Generate Wealth And Employment Make Us All Poorer

June 26, 2012 / / 0 Comments

This has been around for a while, but it is worth re-reading:

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 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 – the paying customers?  How could they divide the $20 windfall so that everyone would get his fair share?
They realised 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, where the atmosphere is somewhat friendlier.

Anonymous, sometimes erroneously attributed to Dr David R Kamerschen.

Then What’s The Point?

March 11, 2011 / / 0 Comments

As I noted a few days ago, the only way a carbon price can have any affect on CO2 output is by reducing the use of fossil fuels.

It does this by making the use of those fuels more expensive. This increases the cost of electricity, of water (especially if that water come from a desalination plant), of manufacturing and mining, production of agricultural goods, transport and travel. A carbon tax increases the cost of everything, because everything in our economy depends on fossil fuels.

When the cost of production goes up, the price of the items produced goes up. People buy less, production goes down.

This is what the Prime Minister said would happen:

“It has price impacts. It’s meant to, that’s the whole point,” Ms Gillard said. “If you put a price on something, then people will use less of it.”

But now Simon Crean says money taken from CO2 emitting companies (ie, any company that produces anything) will be fed back into the economy in the form of compensation to consumers:

“The cost to the families will be compensated,” Mr Crean told ABC radio this morning.

“We have made that clear. We will ensure that the compensation is totally adequate. We will return all of the monies raised to people through the tax mechanism.”

So there won’t be price impacts, so people won’t be using less of anything, so there will be no reduction in CO2 output.

So what is the point? What is the Gillard government trying to achieve?

Ms Gillard also warned that Australia would miss out on new green jobs and be left behind the rest of the world if it did not create a “low carbon economy”.

But a paper released a few days ago by Verso Research confirms what other studies have shown – that every ‘green’ job created costs four jobs somewhere else.

The Verso study finds that after the annual diversion of some 330 million British pounds from the rest of the U.K. economy, the result has been the destruction of 3.7 jobs for every “green” job created.

The study concludes that the “policy to promote renewable energy in the U.K. has an opportunity cost of 10,000 direct jobs in 2009-10 and 1,200 jobs in Scotland.” So British taxpayers, as is the case here in the U.S., are being forced to subsidize a net loss of jobs in a struggling economy.

This is the grand plan: a huge bureaucracy to manage a tax to reduce carbon output that won’t reduce carbon output, and a green job scheme that will cause higher unemployment.

Are There Apprentiships or Trainieships for Peopel in Your Inderstry?

October 23, 2010 / / 0 Comments

A couple of weeks ago a Year Twelve student from the local school gave me a questionaire on employment in the IT industry.

That was one of the questions. Most of the others had similar errors.

I have two questions of my own.

1. Does the school check questionnaires, letters, etc before they go to members of the public?

Well, obviously not.

Or at least I hope it was not checked by a staff member, because if it was, our schools are even worse than I think they are.

2. How is it that a reasonably intelligent boy in Year Twelve has such appalling literacy?

If a person who is no dimwit can get through twelve years of schooling and have no idea how to spell or construct a sentence, what the heck has he been doing all that time?

And what have schools been doing with all my tax money?

Future Pie Makers

September 12, 2010 / / 0 Comments

On 16th August the Sydney Morning Herald published a column by Paul Sheehan. Sheehan was writing about Gillard’s pork pies. He described her as a serial, brazen liar.

At the end of the article, he talked about the problems that arise for any country when a substantial part of the population becomes addicted to government spending – when the pie eaters begin to outnumber the pie makers.

People who demand, and feel entitled to, subsidies for their park, or industry, or art fest, or who rely on government benefits, schemes, funding or stimulus payments, are pie eaters. They have strong reason to vote in a big taxing, big spending government.

People who risk their own savings to begin business ventures which will produce goods and services, pay tax, and employ others, are pie makers.

The problem is that there comes a point when the pie eaters punish the pie makers so much, through taxes and over-regulation, that there is no incentive to risk anything, try anything, do anything. The temptation is for the pie makers to become pie eaters.

Then the economy grinds to a halt, because without profits, there are no taxes, and if there are no taxes, there are no subsidies, no social services.

When I was at university, I was taken in by the slogan ‘People before profits.’ Now I know that people need profits, that the whole structure of social welfare, health, roads, schools, etc depends on profits.

Some young people are wiser than I was. Ben-Peter Terpstra has been talking to some of them: young people who are willing to study and work, and who have a vision for Australia.

Future pie makers.

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