The tax system explained in beer…

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Try and keep up with the math, proggies!

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
“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, where the atmosphere is somewhat
David R. Kamerschen, Ph.D.  –   Professor of Economics.

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0 responses to “The tax system explained in beer…

  1. I think the professor pretty much nailed it. 🙂

  2. Yup, het got it. 🙂

  3. The author can’t tell an apple from an orange. I bet that it took MUCH longer to conceive and write this junk than it does to destroy it. Here goes:
    The analogy assumes that everyone WANTS to pay taxes, but that not everyone can afford to do so. Next, if the rich quit paying taxes, the poor will see that life goes on and quit paying theirs, too.
    Lastly, since the analogy assumes dollars and not kroner or escudos, it ignores the fact that most taxes are illegal, constitutionally speaking, and that the Federal Reserve Bank (and its thug enforcer, the IRS) are owned by foreign powers (RED SHIELDS), but that is another matter.
    So while this is a cute story, it’s as fearsome as a paper tiger. Anyone who learns to read and reason for themselves (a shrinking minority, alas) should easily see the faulty comparison. Everyone else will try to remember and repeat it as their own.
    You can’t fool alert people with this stuff, nor the poor. Cheers.

    • Suggest you take your complaint to the Distinguised Professor, the author of this. He has written over 10 books and has consulted and/or provided expert testimony in approximately 135 antitrust cases. He has been qualified previously as an expert in industrial and antitrust economics dealing with consumer, business, and government behavior in the marketplace. But what does he know?

      • Thanks but no thanks. Why don’t you? Books don’t impress me. Zbigniew Brzezinski wrote a bunch of them, too, and after all that work, the only thing he’s got in common with Minnie Mouse is that he’s fucking Goofy. Get real, Bub!
        The Beer analogy is not only stupid, it’s based on false assumptions. Your problem seems to be that you believe in words. Those who know and live the difference between words and experience, or theory and practice see right through this shit.
        It’s a fine drinking story. The author’s background merely discredits him. It’s like trying to learn justice from a lawyer. Puh-leeze.

        • I have no complaint with what the professor said, so why contact him? Isn’t Skippy heading to Disneyland soon? Talk about Goofy…
          To each their own…you can have your opinion. Books don’t impress you? Then why did you state “anyone who learns to read”….why bother with that? And as for your “words” which you don’t believe in, please refrain from obscenities, as described on our “about” page. Not our cup of tea…

          • Like I care for your comfort zone? Didn’t you begin with the suggestions, Nutsmudge? Credentials confer no right to set the terms of the discourse. To put it in terms more familiar to a Southern Gentleman, you, Sir, are a slovenly coward and would be happy to prove it at sword-point.
            Happy now?
            As for your legitimate question, its answer is this: One must read many books (in many languages and from many centuries) to fully understand their limits, but that does not mean that one must read them all. The difference between knowledge and understanding lies in being, not in having. Thanks for asking.
            Is that closer to your cup of Kool-Aid? Drink up. Cheers.

            • Sounds like you were probably the bully on the playground.
              You want to set the terms of discourse? Get you OWN blog. Until then, buzz off. As in tomorrow you’ll be banned.

              • I must admit, I see Prodigalsun’s point. He (?) points out reasonable flaws in the metaphor and folks are quick to attack him with resumes. He may be rude to you, but it’s not as if you aren’t asking for it. Bullies love the status quo and when a tough guy comes along, the bullies’ true colors often show. For what it’s worth, it looks like you’re the bully and Prodigalsun is the tough guy. He’s got more balls (is that a four letter word?) than you do, and possibly more brains. His tact could use work, but no one is perfect. I imagine you will have me banned as well. A bully would do so, while a gentleman would engage Prodigalsun with an original idea of their own. Meanwhile, I’ll search for his blog, since the tea here is tepid.

                • Hey, Nancy, or should I call you “ProdigalSun” instead, since you two have the same IP address.
                  As for ProdigalSun:
                  Never have I seen anyone wage such a ferocious and pointless battle over something this trivial. You are exhausting. Now, go away and harass some other blog. You might want to spend some of your obviously overflowing time and energy bettering your rat-hole of a city — Oakland, California — instead.

            • Coward? You think I’d prove it at sword-point? Ha….
              I’m a big fan of the 2nd Amendment though.

            • Don’t push it, prod.
              As a libertarian, I pretty much agree with your assertion that most all taxes are illegal.
              What I will not go along with is your apparent confusion with my friend DCGs post and the idea that she agrees with our current “progressive” income tax system.
              You did notice the “humor” tag, did you not?
              Perhaps the next time you choose to comment here, you will take a little time and learn a little more as to who is who here.
              Nighty night.

            • What, no slapping anybody with glove? My word, man, there’s certain ways things should be done! If you are implying THAT, of course… which I wouldn’t do if I were you. Not a good idea.

    • Well, I admit the “Going Gault” part of it is a little far-fetched (although we do have Warren Buffet whining how people in the #10 spot like him should pay more taxes to curry favor into him not having to pay as much as even as he should now) but, otherwise, it’s pretty good.

    • Prodigal,
      Why are you so hostile and sneeringly superior?
      This beer metaphor is about the present tax system. The author, Dr. Kamerschen, wasn’t addressing the constitutionality of the federal income tax (good luck challenging that) or the Federal Reserve system (which I’ve questioned in several posts here on FOTM). Which makes your attack against Kamerschen ad hominem.
      As for your assertion “if the rich quit paying taxes, the poor will see that life goes on and quit paying theirs, too.”
      I have news for you: The “poor” in the United States already don’t pay income taxes. Instead, they get money “back” from “the government”, i.e., from those who do pay taxes. From CNN Money:
      “For tax year 2010, roughly 45% of households, or about 69 million, will end up owing nothing in federal income tax, according to estimates by the nonpartisan Tax Policy Center. Some in that group will even end up getting paid money from the federal government.”


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