You've heard the cry from across South Africa in the last couple of weeks: "It's just a tax cut for the rich!" - and then it's accepted as fact. But what does that statement really mean? The following explanation may help.
Suppose that every night, ten men go out for dinner at La Porchetta's.
The bill for all ten comes to R1000.
They decide to pay their bill IN the way we pay our taxes, and it goes like this:
The first four men (the poorest) paid nothing.
The fifth paid R10
The sixth R30,
The seventh R70,
The eighth R120,
The ninth R180,
The tenth man (the richest) paid R590
All 10 are quite happy with the arrangement, until one day, the owner says:
"Since you are all such good customers, I'm going to reduce the cost of your daily meal by R200."
So now their dinner for ten only costs R800.
The group still decides to pay their bill the way we pay our taxes.
The first four men are unaffected. They will still eat for free.
But how should the other six, the paying customers, divvy up the R200 windfall so that everyone would get his "fair share"?
They realise that R200 divided by six is R33.33.
But if they subtract that from everybody's share, then the fifth and sixth men would each end up being paid to eat.
The restaurateur suggests reducing each man's bill by roughly the same percentage, thus:
The fifth man pays nothing (like the first four) instead of R10 (100%saving)
The sixth pays R20 instead of R30 (33% saving)
The seventh pays R50 instead of R70 (28% saving)
The eighth pays R90 instead of R120 (25% saving)
The ninth pays R140 instead of R180 (22% saving)
The tenth pays R490 instead of R590 (16% saving)
Each of the six are better off, and the first four continue to eat for free, as now does the fifth - but outside the restaurant, the men began to compare their savings.
" I only got 10 Rand out of the R200," declared the sixth man. He pointed to the tenth man "but he got R100!"
" That's right," exclaimed the fifth man. "I only saved 10 Rand too. It's unfair that he got ten times more than me!"
" That's true!" shouted the seventh man. "Why should he get R100 back when I got only R20? 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 then surrounded the tenth and beat him up.
The next night the tenth man didn't show up for dinner.
The nine sat down and ate without him, but when they came to pay the bill, they discovered that they didn't have enough money between all of them to meet even half of the bill!
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 anymore.
HOW DO YOU SEE THE FUTURE OF SOUTH AFRICA?
WITH THE HIGHLY EDUCATED, THE PROFESSIONAL AND THE ENTREPRENEURAL EARNERS LEAVING THE COUNTRY....................
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