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Our Tax System Explained: 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 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.
>
> 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.
