Posted on 08/12/2009 8:55:38 AM PDT by Notoriously Conservative
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.
Visit Notoriously Conservative for more great conservative content.
It’s a keeper! Bookmarked — thanks for posting.
bttt
This is old, been done many times
http://www.google.com/search?q=beer+tax+analogy
Just seems like a cheap plug for your blog
You left out the part where the Nanny State comes along and lectures them —at the beer-buyers’ expense — on the evils and health risks of drinking beer
bump
Most likely drinking Guinness in Ireland with it’s low corporate tax rate...
THIS SHOULD BE A REQUIRED READING IN THE SCHOOL SYSTEM
Wow, quick to jump to conclusions eh? It’s new to me.
It is a novel way to explain things. But, the one who paid the most, if this was real life, drank about 22% of the beer. And a couple of the guys who drank for free, worked in businesses ran by the other where they were were not paid enough to be able to buy beer, but made enough profit for the other guys to be able to buy beer and treat the others.
And some of the guys who were paying for beer, had enough to treat the poor ones, because in their businesses, they let the taxpayer subsidize the 4 poor guys by picking up their health care, food and rent.
And, why is it whenever someone wants to raise taxes, the argument comes out that this is only going to raise the costs for everyone because the tax hikes will be passed on in the form of higher prices, meaning the 4 poor guys really are paying taxes in the form of higher product costs. Yet, when the GOP gets on the “poor rich folks” bus, this “fact” seems to be forgotten.
parsy, who is more worried about the unemployed than he is the dang filthy rich 1%.
Perhaps we can create a "Public School-friendly" version, using condoms in place of beer.
parsifal, like real life, your counter point shows where the major break down comes into play. NC’s example works great UNTIL you start introducing government into the equation, then things get out of whack.
Not bad, but the original author started it out in the present tense, to go, and then switched into the past tense, went, in the first few paragraphs. It makes for a poorly told story, even though the story is still good. It’s like most of it is a flashback. Somehow, you should fix it to read like 10 men went out for a beer, and so on.
Then, the transition of That’s what they decided to do is put out without any justification as to why any random grouping of ten individuals would agree on such a complicated means of paying a tab. In real life, rarely would there be a very rich guy drinking beer in a pub with 4 people who can’t even afford to buy one beer, let alone drink all night. The rich guy would be at the country club drinking Heinekin, the middle-income guys would be at the Elks Lodge drinking Bud, and the poor guys would be standing around under the bridge drinking Keystone, holding signs saying “will work for food.”
Which is why I can never understand the anarcho-capitalist point of view which blames gov’t for all evils in the economy. The human race is not going to be without gov’t ever. Time for non-nihilists about gov’t to replace these quacks. For egs, why would anybody ever vote to send Peter Schiff to Congress? It would be like hiring an atheist as the church pastor.
parsy, who says we need to understand there is always going to be a government because civilization can not work without it
Yes, but some things need repeating!!!
Just because it’s been around a few times doesn’t
make it common knowledge to all !!!
Mayhaps I should have said "excessive government interference in my reply.
TP, who says that government is not the answer; it is the problem....oh wait that wasn't me, it was Ronaldo Magnus :-)
I wasn’t criticizing you. I was just making a statement about the anarcho-capitalists. Those guys still can’t bring themselves to jump on the Wall Street types who precipitated the depression we’re in. It’s the govt. Its the poor folks. Its the godless, mindless, communists. Its Barney Frank. Its everybody in the universe except the greedy rich white folks on Wall Street.
Its gets so comical I almost wonder if GS is paying people to blog on the net sometimes.
parsy, who says the anarcho-capitalist wealthy worshipping twerps are going to sink the conservative ship yet
Have you read every book ever printed?
Sheesh.
FMCDH(BITS)
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