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Old 06-26-2012, 08:31 AM   #1
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Default The tax system explained in beer

David R. Kamerschen, Ph.D., Professor of Economics has reduced our tax system down to beer - sounds odd, but in the simplicity of this little example the true nature of the unfair taxation of the wealthiest sector of our society floats to the top


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, as many are considering 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 .
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Old 06-26-2012, 01:22 PM   #2
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I'm with you one this, but for one thing.

The first four also have free housing.
But 5-8 have house payments, car payments, etc.
9 and 10 live in houses owned by their company and drive cars owned by their company and fly around in jets owned by their company. The company of course writes all of these off as business expendatures as well as operating losses, because the cars, jet and houses are now devalued through use...

The ones that are suffering are 5 and 6. Because the govt pays 1-4 enough money to move into their neighborhoods and destoy 5-6 home values and other property. Of course 5-6 cant afford to live where 7-10 do, so they are just screwed.
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Old 06-26-2012, 09:05 PM   #3
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^^^ this. Taxing that top .01% does nothing for them and does not alter there lifestyle. Think about this. If capital gains were taxed as ordinary income, 97% of the revenue the government would generate would come from .03% of the earners....
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Old 06-27-2012, 12:44 AM   #4
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Quote:
Originally Posted by NoMoSurf View Post
I'm with you one this, but for one thing.

The first four also have free housing.
But 5-8 have house payments, car payments, etc.
9 and 10 live in houses owned by their company and drive cars owned by their company and fly around in jets owned by their company. The company of course writes all of these off as business expendatures as well as operating losses, because the cars, jet and houses are now devalued through use...

The ones that are suffering are 5 and 6. Because the govt pays 1-4 enough money to move into their neighborhoods and destoy 5-6 home values and other property. Of course 5-6 cant afford to live where 7-10 do, so they are just screwed.
Oh so true
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Old 06-27-2012, 01:03 AM   #5
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Quote:
Originally Posted by polar21 View Post
^^^ this. Taxing that top .01% does nothing for them and does not alter there lifestyle. Think about this. If capital gains were taxed as ordinary income, 97% of the revenue the government would generate would come from .03% of the earners....
If people would continue to invest, they never do when you take that much incentive to risk their money away. Federal revenue has always gone up when you cut capitol gains, but that dosen't hose the evil rich people and it's really all about bringing them down...right?
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Old 06-27-2012, 11:35 AM   #6
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The problem isn't with the eighth, nineth or tenth guy, they are the ones making sure that the beer supply is uninterupted, and that the phone serviced is reliable so they can all call their ol' lady's on the latest and greatest new cell phones to let them know they are working late, while also making sure that there is plenty of gas available so they can all drive to the bar in the latest model car...etc, etc

The problem is that the first four guy are drinking more than the other six combined while holding the view that it is owed to them anyway because it's the rich guy's fault that they are poor.

If you confiscated the wealth of the top 1% it would be enough to fund the government for maybe a week.
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Old 06-27-2012, 12:15 PM   #7
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The problem isn't any of the ten. It is entirely the Government. They are the ones creating the welfare mentality, by giving to those who have less in order to perpetuate the cradle to the grave reliance. Because what you have in this world are two kinds of people, givers and takers. The givers cannot out give the takers taking.
The best way to solve all the problems is stop the perpetual voting in of all politicians with term limits and pay scales to a normal working person with no retirement benefits. Then make them get a real job to provide for their own welfare after service in Government.
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Old 06-27-2012, 01:48 PM   #8
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Quote:
Originally Posted by NoMoSurf View Post
I'm with you one this, but for one thing.

The first four also have free housing.
But 5-8 have house payments, car payments, etc.
9 and 10 live in houses owned by their company and drive cars owned by their company and fly around in jets owned by their company. The company of course writes all of these off as business expendatures as well as operating losses, because the cars, jet and houses are now devalued through use...

The ones that are suffering are 5 and 6. Because the govt pays 1-4 enough money to move into their neighborhoods and destoy 5-6 home values and other property. Of course 5-6 cant afford to live where 7-10 do, so they are just screwed.
Hello, my name is 5-6, nice to meet ya.
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Old 06-27-2012, 02:20 PM   #9
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Quote:
Originally Posted by TURTLE View Post
Hello, my name is 5-6, nice to meet ya.
Nice to meet ya 5-6, My name is 5.375............
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