Thursday, 12 February 2009

For those who understand, no explanation is needed. For those who do not understand, no explanation is possible.

I am indebted to someone (who shall be nameless!) who sent me this explanation by David R. Kamerschen, Ph.D (Professor of Economics) as to how the tax system really works. For those who understand, no explanation is needed. For those who do not understand, no explanation is possible.

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 realized that £20 divided by six is £3.33. But if they subtracted that from everyone'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 pound out of the £20,' declared the sixth man. He pointed to the tenth man, 'but he got £10!'

'Yes, that's right,' exclaimed the fifth man. 'I only saved a pound, too. It's unfair that he got ten times more than I did'

'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.

Will the last Englishman to leave the country, please turn out the lights, because there will be no one left, willing pay to the bill

1 comment:

  1. What this over educated under intelligent jerk didn't tell you was that they all still had to pay the $10 cover charge to get in the bar. (sales tax, property tax, fees, import tax... payroll taxes, you know all that other tax that isn't income tax?) did you forget about that Mr. University of Georgia?...

    or how about the 11th guy, who pays the $10 but isn't allowed to have a beer because he has to cower in the corner and wash the dishes hoping no one notices him. (illegal immigrants who pay all the same non income taxes... (and some of them DO pay income tax))

    Ignoring all that lets just stick to this Moron's idea.

    Does everyone benefit equally from Government services. Do the first 4 guys who obviously make so little money that they can barely afford anything else (certainly not the beer), really get the same services as the richest?... does the poorest 4 get the same benefit from the police force? and law and order?... Really think about it. the 4 people who obviously have barely any possessions. if there was no police or a functioning economy those 4, maybe the 5th and 6 man... would really want some beer, and no way to get it... so they grab their guns (that the richest man demanded everyone keep) and head for the 10th man's house and they take what they want. Who's gonna stop them?.. the League of Extraordinary Rich Bastards?

    So who loses the most when the poorest have slightly less then they have now, and no one to protect the streets?...

    How about national defense? ... does the poor immigrant really care if we have 11 battle carrier divisions patrolling the world making sure "US interests" are safe?.. who's interests are those?.. guys 1 thu 7?... really ??????? (oh.. all of a sudden we're all in this together... shocking...)

    Now of-course many government programs, education, and such benefit the poorest much more then the Richest (in the short term)... but as any economist will tell you (maybe not at the University of Georgia) there is always the long term. Pulling people out of poverty and enlarging and strengthening the middle class (thru education, and such) means that all productivity goes up and the pie (wealth) grows larger and faster then when the money/wealth is concentrated in the hands of so few.