Thread: The Tax System Explained in Beer

This is for you cupcake.


THE TAX SYSTEM EXPLAINED IN BEER

Suppose that every day, 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.
The tenth man (the richest) would pay $59.

So, that's what they decided to do..

The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve ball. "Since you are all such good customers," he said, "I'm going to reduce the cost of your daily 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 ? 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 drink his beer.

So, the bar owner suggested that it would be fair to reduce each man's bill by a higher percentage the poorer he was, 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 (100% saving).
The sixth now paid $2 instead of $3 (33% saving).
The seventh now paid $5 instead of $7 (28% saving).
The eighth now paid $9 instead of $12 (25% saving).
The ninth now paid $14 instead of $18 (22% saving).
The tenth now paid $49 instead of $59 (16% saving).

Each of the six was better off than before. And the first four continued to drink for free. But, once outside the bar, the men began to compare their savings.

"I only got a dollar out of the $20 saving," 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 benefit than me!"

"That's true!" shouted the seventh man. "Why should he get $10 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. This new tax system exploits the poor!"

The nine men surrounded the tenth and beat him up.

The next night 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. They didn't have enough money between all of them for even half of the bill!

And that, boys and girls, journalists and government ministers, 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 may 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.

I took my employees out for Christmas dinner last Friday night, and they all, to the person, exaulted my generosity in 2010 for the raises they got during this economic down turn, they all were grateful for the bonus they got, and they all were grateful for me still paying 100% of their group health care, and 50% of their families care. Then I pulled one on them, I slipped out the back door stiffing them with the bill. (The restaurant already had my credit card for the dinner, in case it didn't get paid by them)

The next day a "spokesman" tip toed into my office with the "paid bill" and asked if he could be reimbursed so he could give each of the other employees their share of the bill they had collectively paid. Sure, I said, and wrote him a check. Then I emailed everyone that for 2011 all salaries would go back to 2009 rates, health care would now cost them 30% of the premium, and 50% for their family, and promised that there would be no bonuses for 2011.

Within 25 minutes they ALL seven came back into my office, check torn up in an envelope, and apologized for taking for granite what many of their peers in other companies do not have.

Lesson 1: Be thankful for what you have. Lesson 2: Don't piss off the guy that writes the checks cause not only does he pay the bills, he pays ATTENTION , too.

The guy that had enough cahonnas to approach me with their collective feelings got a $100. gift card to Outbacks. I like a guy with guts, even if it is sometimes misplaced. Then I emailed everyone again. "Merry Christmas, I love you all. My present to YOU was a - "Good Look at Reality" - coming soon at a theater near you!"

True story. Merry Christmas, all. Stay safe and love each other.