Chi Guy asked in Politics & GovernmentPolitics · 1 decade ago

Which is better for the economy, giving 100 millionaires a $10 Million tax cut each or giving 400,000 people?

...$2500 tax cut each?

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  • 1 decade ago
    Best Answer

    This question is not only a loaded question or logical fallacy, it's a straw-man argument. 100 Millionaires or 400,000 people. Are millionaires not people? Are the 400,000 people paying taxes? You did not provide enough data to answer this fairly.

    Its not about which is better for the economy, its about which is fair to the people actually paying taxes. Paying Taxes and the Economy are two different subjects.

    -- The following is not my original work nor do I know the original name of the author, but it's accurate in simple terms. --

    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, and the tenth man ? the richest ? would pay $59.

    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 (in tax language a tax cut).

    "Since you are all such good customers," he 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 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 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 paid nothing, the sixth pitched in $2, the seventh paid $5, the eighth paid $9, the ninth paid $12, leaving the tenth man with a bill of $52 instead of his 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 men began to compare their savings. "I only got a dollar out of the $20," declared the sixth man who pointed to the tenth. "But he got $7!"

    "Yeah, that's right," exclaimed the fifth man, "I only saved a dollar, too . . . It's unfair that he got seven times more than me!".

    "That's true!" shouted the seventh man, "why should he get $7 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 he 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, a little late what was very important. They were FIFTY-TWO DOLLARS short of paying the bill! Imagine that!

    And that, boys and girls, journalists and college instructors, 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.

    Where would that leave the rest? Unfortunately, most taxing authorities anywhere cannot seem to grasp this rather straightforward logic!

  • 4 years ago

    A 40k tax cut to the millionaire. Giving away 40k to bums may be the compassionate thing to do, but it isnt the smart thing to do. You see. Unless it was money out of your personal pocket, in order to "give" 4 bums 10k each, you have to had taken that 40k from someone else to begin with, which depresses the economy. Because the people you took that 40k from are now 40k poorer. Taking from people who earned that 40k, only to turn around and give it away to a bunch of bums who never worked for it, isnt good economics. And the bums will waste most if not all of that 40k A 40k tax cut to a millionaire, You are not taking anything away from anyone to give him a tax cut. you are letting him keep more of what he earns. And a millionaire will turn around and put that 40k to good use. (thats why he's a millionaire, because he knows how best to invest or spend that 40k)

  • 1 decade ago

    This is the age old 'demand side' vs 'suply side' stimulus debate.

    The former creates a suply side stimulus. It puts money in the hands of people who will likely save & invest most of it. That could go into capital investment in America, which would create jobs and help the economy. It could also go into Federal Bonds, and fund the deficit, or it could be invested overseas and have only an indirect effect on the local economy.

    The latter creates a demand side stimulus. It puts the money in the hands of people who will likely spend most of it. The result, again, depends on how it's spent. If it's spent on 'services,' it will create service-sector "McJobs," if it's spent on locally produced goods, will create manufacturing jobs, if it's spend on imports, it has a stimulative effect on the economies producing those goods, not on this one. In any case, it can also tend to raise price levels.

    Another thing to consider is where you are on the Laffer Curve. A large tax cut can result in only a modest decrease in tax revenues, or even an increase, if taxes are already relatively high. If taxes are relatively low, tax cuts cause corresponding drops in tax revenue. Cutting taxes provides an economic stimulus, and a fairly rational one, since it's many individuals making the spending decisions with the money involved. But, if you're far enough down the Laffer Curve, they also 'cost' just as much (in lost tax revenue) as fiscal stimulus.

    Fiscal stimulus can have an advantage in that it can be targetted dometically, while the stimulus provided by a tax cut may be invested overseas or spent on imports.

    Now, the economy's global, so you could argue that even stimulating foreign economies would also be good for ours, in the long run.

  • 1 decade ago

    Clearly it's better to give John Q. Public a helping hand, as opposed to following the broken Republican strategy of stroking the top 2% in this country.

    Frankly, I'm sick of supporting the rich.

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  • 1 decade ago

    Ain't it the truth?

    If I were a millionaire, and I got a $10 million tax cut, that's going straight to the bank. 400,000 people are going to spend that money.

  • 1 decade ago

    It would be good either way. Both stimulate the economy far better than raising taxes across the board to support a clearly socialist agenda.

  • 1 decade ago

    How about just letting me keep the $2500 I paid in taxes last year and throwing the few dishonest millionaires of which you speak in jail?

  • Anonymous
    1 decade ago

    Giving 400,000 people. It's more equitable

  • 1 decade ago

    The best thing for the economy is for government to quit interfering in the market place.

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