Taxes Explained in Beer

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 p/ay $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 every body'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
received 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.

 

yep. if you don't understand it there is no explaining it. After being in business I understand why there are people who do it "under the table".... the tax laws can be so onerous to some people or corporations. And for those who are in business trying to save the money as a "savings" for the next year? impossible. we either pay it in taxes or put it into an IRA.... that alone signify's the lack of security for our retirement and any S.S. income at that point.

 

Brilliant post Islandlife,..i remember when working in one job in London,..which paid VERY well,..before the year was out i had reached my tax allowance limit and soon after,..of any overtime paid the tax deducted was 3/4 of the overtime.