INCOME INEQUALITY IS GOOD

Yes, but economic policy should aim at supporting the poorest in society so as to raise them to the 'middle classes' so that they can buy lots of stuff. It makes no sense to have a large, permanently poor, segment who are largely inactive economically, a drain on the public purse and potentially a hive of criminality (cf. Proverbs 30:7-9).

Also, it's the right thing to do cf. Galatians 2:10.

 

1. The poor don't pay income taxes (generally speaking) so no tax cut is necessary. We were talking about tax cut policy.
2. The poor should not rely on government to "raise them up to middle class". The poor should have every opportunity to improve themselves and achieve this result on their own. The government handing them money so they can "buy stuff" is misguided policy.
3. There should be a safety net for poor people. Medicaid, Social Security, welfare, unemployment, etc.

 

OK. Here is where the error in the analogy begins.

"I'm going to reduce the cost of your daily dinner by $20.
Lunch for 10 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 everyone would get his fair share??
They realized that $20 divided by six is $3.33.

There is no $20 windfall to "split up". The restaurant owner never gave them $20 to split up. Instead of the restaurant owner giving the diners $20, the cost of the lunch has been reduced, so there is a new lower amount to be proportioned out.

Here's how it should be analyzed. The bill is no longer $100, the bill is now $80. Thus:

The first four guys paid 0% of the bill before, they will pay 0% of the bill now.
The fifth guy paid 1% before ($1.00), he pays 1% now, or $.80.
The sixth guy paid 3% before ($3.00), he pays $2.40 now.
The seventh guy paid 7% before ($7.00), he pays $5.60 now.
The eighth guy paid 12% before ($12.00) he pays $9.60 now.
The ninth guy paid 18% before ($18.00) he pays $14.40 now.
The tenth guy paid 59% before ($59.00) he pays $47.20 now.

This would be the fair way to split up the bill if they wanted to keep all "diner rates" proportionally the same.

Similarly, tax cuts are not money the government gives you to divide up, it's money they no longer take from you. But what if you were to apply the Bush tax cut percentages--rates went down 4.6% for the wealthy and 3% for the next three brackets--to the meal, you would reduce each diner's original percent of the $100 bill by an equivalent amount. Thus:

The richest guy was paying 59% of the bill when the lunch was $100, now he will pay 54.4% of the $80 bill, or $43.52.
The next richest guy was paying 18% of the bill when the lunch was $100, now he will pay 15% of the $80 bill, or $12.00.
The next guy was paying 12%, he will now pay 9% of $80, or $7.20.

...and so on.

The way you've got it described is exactly like the old problem with the 3 guests staying in the hotel and they are charged $30 for the room. But then the manager realizes the room should have cost only $25 so he sends the bellhop up to the room to give each person a dollar and to keep two dollars for his trouble. So now each person has paid $9 each, or $27 total, and the bellhop kept $2, so that's $29. What happened to the other dollar?

 

Yes, which is exactly what your lunch diner story is doing. It is taking a story about proportionally paying the bill and introducing a completely fabricated segment about the diner's getting a $20 windfall. They never got a windfall. There is no $20 to "split up". For this to be true the diner's would have to spend $100 for their lunch, pay the restaurant owner the $100, and then have the owner come back to the table and present them with a $20 Andrew Jackson to split up amongst themselves.

What your story is doing is reducing the lunch tab to $80. This amount is the amount that should be split up proportionally.

I'm not doing that. I don't even know where you are getting that from.

Yes, the richest guy should save the most money precisely because he is paying the most. His percentage of $100 is the most so his gross dollar amount saved should be the most. And here is where you are getting confused--gross dollars vs. percentage of dollars.

From the story:
The tenth now paid $49 instead of $59 (savings only 16%).

Again, your analogy has these guys splitting up the phantom $20 that they never received, then it makes a percent calculation from the amount he originally paid! That's dishonest. Look, you can't say the guy is getting $10 of the $20 savings and that is only 16% savings. He's getting fully 50% of the savings! This is the problem with the story--it mixes up the methods used to calculate savings.

From the story:
The sixth now paid $2 instead of $3 (savings 33%).

The guy is getting $1 savings from the bill being reduced from $100 to $80. That's a 5% savings, not 33% savings.

 

Exactly... already can tell I am gonna be quoting you for truth (QFT) quite often.

Often people never completely realize just how good we have it in the west compared to the rest of the world. I have kids mowing yards that are making more than some do in other countries. In about half of Africa to this day they live on roughly 2 dollars a day.