US Tax System Explained...With Beer!
EXPLAINING OUR UNITED STATES TAXING SYSTEM WITH 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.
"Since you are all such good customers," he said, "I'm going to reduce
the cost of your daily beers 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 veryimportant....they didn't
have enough money among 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.
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!
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