The Tax System Explained in Beer
Suppose that once a week, ten men go out for beer 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.
And the tenth man (the richest) would pay $59.
So, that's what they decided to do.
The ten men drank in the bar every week and seemed quite happy with the
arrangement until, one day, the owner caused them a little problem.
"Since you are all such good customers," he said, "I'm going to reduce
the cost of your weekly beer by $20." Drinks for the ten men 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 drink 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 not only would the first four men still be
drinking for free but the fifth and sixth man would each end up being
paid to drink his beer.
So, the bar owner suggested that it would be fairer to reduce each man's
bill by a higher percentage. They decided to follow the principle of the
tax system they had been using and he proceeded to work out the amounts
he suggested that each should now pay.
And so, the fifth man, like the first four, now paid nothing (a 100%
saving).
The sixth man now paid $2 instead of $3 (a 33% saving).
The seventh man now paid $5 instead of $7 (a 28% saving).
The eighth man now paid $9 instead of $12 (a 25% saving).
The ninth man now paid $14 instead of $18 (a 22% saving).
And the tenth man now paid $49 instead of $59 (a 16% saving).
Each of the last six was better off than before with the first four
continuing to drink for free.
But, once outside the bar, the men began to compare their savings. "I
only got $1 out of the $20 saving," declared the sixth man. He pointed
to the tenth man, "but he got $10."
"Yes, that's right," exclaimed the fifth man. "I only saved $1 too.
It's unfair that he got ten times more benefit than I did."
"That's true" shouted the seventh man. "Why should he get $10 back, when
I only got $2? The wealthy get all the breaks."
"Wait a minute," yelled the first four men in unison, "we didn't get
anything at all. This new system exploits the poor."
The nine men surrounded the tenth and beat him up.
The next week the tenth man didn't show up for drinks, so the nine sat
down and had their beers without him. But when it came time to pay the
bill, they discovered something important, between them they only had
$30 - they didn't have enough money between all of them to pay for even
half of the bill.
And that is how our tax system works. The people who already pay the
highest taxes will naturally get the most benefit from a tax reduction.
Tax them too much, attack them for being wealthy and they just might not
show up anymore. In fact, they might start drinking overseas, where the
atmosphere is somewhat friendlier.
David R. Kamerschen, Ph.D.
Professor of Economics.
For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible
Every want-to-be-dictator needs scape goats.
The rich are the new "jews" in the European 1930's context.
Paul Lamar
Paul --
I've seen that before someplace and it's still terrific. But no matter how
true, those last four guys will never comprehend that without the rich guy
picking up a huge piece of the tab nobody benefits.
Maggie Thatcher was right. The problem with socialism is that eventually
you run out of other peoples' money.
Fuller
In my experience, after traveling around in 35 different countries some of them full
blown communist, no work gets done either. Hence the Russian joke in St Petersburg
about the canon on the bow of the Aurora.
"At the end of 1916 the city was brimming with revolutionary ferment and part of her
crew joined the 1917 February Revolution. A revolutionary committee was created on
the ship, with Aleksandr Belyshev elected as its captain. Most of the crew joined the
Bolsheviks, who were preparing for a Communist revolution."
"According to the Soviet account of history, on 25 October 1917, Aurora refused to
carry out an order to put to sea, which sparked the October Revolution. At 9.45 p.m
on that date, a blank shot from her forecastle gun signaled the start of the assault
on the Winter Palace, which was to be the last episode of the October Revolution."
See that canon on the bow of the ship. That is the most powerful cannon in the world.
One shot from that canon devastated Russia for the next 70 years.
At the time I was there St Petersburg looked like Tijuana.
Paul Lamar
--
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