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, ladies and
gentlemen, 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.

 

I'm loving your posts Chiung, keep em up.

 

Sad but true.

 

who's responsible for the last dollar?

 

Great post, hope everyone reads it over.

 

The truth can be sad. But the truth none the less.

 

lol this thread made me laugh

alcoholic's guide to economics!

 

"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."

This is just conjecture.

Also there is no mention how rich the rich are and how poor the poor are. It doesn't mention the weight of the "middle class". It doesn't mention the number of rich.

There are tons of more factors involved. It's a fine analogy otherwise, just way too simplified.

 

Well, of course it's simplified, but what does it matter how rich the rich are how poor the poor are. The 10 members are broken up into brackets, each paying a specific %. After some time, they are given a rebate, reducing the amount of money each will spend. Everyone is getting a rebate, and the poor are getting the most back (by %), but they just don't have much to offer so it's less overall. It's a lot like our tax system. Is it perfect? No, but the point is very clear.

 

It matters because I'm a communist who wants to see the numbers add up.

Either that or a Sophist. Even if it makes sense, I'll find something to be critical about it.

The percentage is based on what they pay, not what they are able to pay.

I can make a system to prove my point and leave out a whole bunch of factors too. But I won't because I'm lazy.

I understand the point, but it doesn't mean I have to agree with it.


Let's say the 10th rich guy, makes a deal with the bartender and gets a hidden "tax break" he already receives, then he's just a greedy bastard. I think this is how a majority of Americans see big corporations.


It looks like more of a problem with perception, than a problem with the tax system.

If this seemed fractured, its because I'm supposed to be working.