Common Sense Economics
Dec 7, 2016 20:45:54 #
Nutter
Loc: Fly Over Zone
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 got’
‘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
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 got’
‘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
Dec 7, 2016 20:57:52 #
Nutter wrote:
Suppose that every day, ten men go out for beer an... (show quote)
Seen it before but ALWAYS good to see it again.
Dec 7, 2016 22:01:32 #
Nutter wrote:
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.
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.
That's what's been happening for the last 40 years or so. US businesses pay the highest taxes and are among the most heavily regulated in the world. Because of this, American businesses have been moving out of the country and setting up shop where the ambiance is a little friendlier to those who work for a living. This is especially true of manufacturing. I have spent the last 30 years as a well-paid technician in a manufacturing environment and now find myself out of work and unable to find any. Was a time I could quit a job on Friday and start a new one on Monday, not any more. The unemployment insurance cuts off after 6 months and that's when the screws really start digging in. Even my application to MacDonald's went nowhere. Once the savings run out, what then? Mooch off the kids? I'm told I need to retrain for some other type of work and applied to the local career rehabilitation service to see what's going. They tell me I could be ready to go in a year or so. This is so wrong on so many levels.
So do I blame 'the rich' for not creating a job for me? Do I blame the people along side me for doing all the work and not leaving some for me? Do I blame the foreigners who attracted all the manufacturing jobs overseas leaving me wanting? Do I blame the unions for overpricing my labor and making me unprofitable? Should I blame the consumers for not buying more stuff?
No. None of the above.
My problem is that there are millions of people who have jobs producing absolutely nothing and making their living by helping themselves to other peoples' money. They are part of this huge leviathan we call government and they're a parasite that keeps getting bigger and bigger at the expense of those who produce goods and services in the marketplace. That's why the US is bleeding jobs and businesses to places like Red China and Brazil.
US corporations are keeping more than a trillion dollars overseas because it will cost way too much to bring it back to the US and they rightly refuse to pay it. So that money gets invested overseas to the benefit of some other foreign worker. Meanwhile, guys like me don't even figure on the unemployment rolls any more because the unemployment ran out. 30 years and now I can't even get a job asking 'fries with that?'.
Dec 7, 2016 22:06:26 #
Dec 8, 2016 04:23:45 #
Nutter wrote:
Suppose that every day, ten men go out for beer an... (show quote)
When did the poor and wealthy start drinking together? The economy doesn't proportionally benefit people so why would we expect to pay taxes that way? As for tax avoidance. Unless we tax zero, as our president elect has proven, people will do everything possible to get out of paying it...
Dec 8, 2016 07:55:25 #
PeterS wrote:
The economy doesn't proportionally benefit people so why would we expect to pay taxes that way?
Absolutely right. Government should simply send a bill to each taxpayer at the end of the year detailing how much is owed as an equal proportion the total cost of governing. For instance, if the government spends 3 trillion dollars, and there are 300 million taxpayers, then each taxpayer should be billed $10,000. If spending total is 3 billion, then each taxpayer pays $10. After all, when was the last time you walked into a store and paid for your goods and services based on your income? Why should government be any different?
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