Michael’s Blog

Some people think John Howard is out of touch with the people’s needs.  Now this is one of the very few true democracies in the world, and they are certainly free to have that opinion.  However, there is an election coming up later this year, and most of us will have to decide who should be our Prime Minister … a Labor Party PM or a Liberal Party PM.

And if you didn’t know, Labour Party = Rudd,  Liberal Party = Howard.

It is common knowledge that the Labour Party voters come from lower socio-economic groups, academics, union members and some greens.  The Coalition led by the Libs are supported predominantly by small to medium business, mid to high-range income earners, and some large businesses.
Basically, this is so because one group are ‘givers’ and the other group are ‘takers’, and before you decide which group you are in and who that group votes for, I thought you may like to read this explanation below on our tax code, which perhaps could assist you decide if John is out of step with you, or just out of step with the non-producing, whinging other half.

“Taxing the People” Explaining Taxation …

When explained like this, it is much easier to understand our current tax code and why the coalition is trying to reform it.  Remember, a serious tax cut is proposed by the coalition in the next budget.  Remember too that the State governments promised to abolish most state taxes including payroll tax, stamp duty and property tax in exchange for obtaining the GST revenue, but despite windfall amounts of GST and a booming property market, our Labor State Governments have not only not abolished those taxes, they have not invested these funds into our infrastructure either.  Consequently, our roads are a shambles; law and order would be a laugh if it were not such a serious subject; water supply is in diabolical shape; our Hospitals are a disgrace; and our power supply is in crisis.
Sometimes politicians, journalists and the liberal left exclaim; “It’s just a tax cut for the rich!” and it is just accepted to be fact.  But what does that really mean? Just in case you are not completely clear on this issue, I hope the following will help.  Please read it carefully.   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:

• 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 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 meal by $20.” Following the reduction, dinner for the ten 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 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:

• 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… the least proportionate savings)

Each of the six paying customers 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 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!”As a consequence, the first 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 among 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 anymore. In fact, they might start eating overseas where the atmosphere is somewhat friendlier.