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Liberty Belle 18 June 2004

Liberty Belle 18 June 2004

Though we sometimes despair that the wheels of freedom move too slowly, and the burden of government on our backs seems to get heavier, it's comforting to know that every day, a bunch of New Zealanders get up and go to work vowing to do at least one thing to get nanny state out of our lives.

One such person is Norman LaRocque, who runs a one-man-band freedom in education think tank called Education Forum (educationforum.org.nz). More's the pity, I don't have enough time in my day to visit his website, because it's crammed with information and research-backed articles showing us why we as parents are best placed to decide what's good for our children's education.

Not Trevor Mallard nor any other Minister of Education.

And sometimes Norman sends out snippets on other freedom-related topics. Last week he sent me this one on tax cuts, written by Dr David Kamerschen, Distinguished Professor of Economics at the University of Georgia. I hope you enjoy it:

This is how the cookie crumbles. Please read it carefully.

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.
The tenth man (the richest) would pay $59.

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". So now the dinner for ten only cost $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, 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 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:
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 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 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. 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.

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 at the table any more. There are lots of good restaurants in Europe and the Caribbean.

Thanks, Norman.
Yours in Liberty,
Deborah Coddington

ENDS

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