This illustrates how the US tax system works and why the dems constant moaning about the wealthy not paying their fair share makes no sense.
This is somewhat old, but worth another look in an election year.
This is somewhat old, but worth another look in an election year.
Bar Stool Economics
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 b e 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, ladies and gentlemen, 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.
Gotta love the Democrats!
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 b e 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, ladies and gentlemen, 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.
Gotta love the Democrats!
Comment