This has been around the internet for a while now, but since we're close to election time I thought I share...

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.

'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 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 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 roughly the same
amount, and he proceeded to work out the amounts each should pay.!
And so:

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 pay $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).

Each of the six was better off than before. And the first four continued
to drink 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 I!'

'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!'

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 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 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 drinking overseas where the atmosphere is somewhat friendlier.


David R. Kamerschen, Ph.D.
Professor of Economics, University of Georgia

For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible.

 

Thank You General Powell for strengthening the movement.

 

After my thread got hammered into partisan hell I am sure that this will be turned into suedo-economic partisan hell It is just plain "common sense" although "common sense" aint so "common" anymore! (TDoA)

J

 

It's so simple to understand, even for a caveman.

 

Geico!!

 

Ill have the roasted duck with the mango salsa

 

That parable has been around, and is incorrectly attributed to several professors.

http://davidk.myweb.uga.edu/

It has also been dumbed down a bit from the original, which proposed 10 diners, rather than bar patrons.

Regardless, the premise of the parable is of dubious validity, and none other than the late, great true conservative, William F. Buckley Jr., stated as much in his analysis of it in 2001:

"The parable, of course, then brings in the drama: The proposed tax reduction of President Bush would reduce income taxes by a total of 20 percent, and the benefits of that reduction are distributed along the lines suggested for the ten diners.

And yes, the protests arise, reaching maximum volume in the matter of relieving the tenth man from his customary contribution of $59 toward the common meal, lowering it to $52.

Okay, but the drama is then taken to what one might call a fourth act, which is one too many. The tenth diner isn't going to be lynched because his survival is too necessary to the other nine diners. What they will do is attempt to diminish the reduction in his allocation of his benefits from the reduced dinner price and spread it among themselves. They'd like to see the tenth man continue to pay 59 percent of all taxes.

That way it doesn't hurt. Ah, but the parable writer obviously believes that it would hurt, in the long run. Because if that tenth diner tires, or is crushed into diminished productivity, he won't have the $59 to contribute to the pool, and that would be very, very inconvenient. Perhaps even life-threatening. If the restaurant has to go without that critical subsidy from the tenth diner, it might just have to reduce the rations paid out.

Granted, if the parable were refined even further, it would have to ask: What was it that caused the tenth man to be so obliging in the first place? Were they threatening to lynch him if he didn't put out? Did the tenth man plot to protect himself?