The Tax System Explained in Beer
\nJANUARY 12, 2012
\nSuppose that every day, ten men go out for beer and the bill for all ten
\ncomes to $100.
\nIf they paid their bill the way we pay our taxes, it would go something like
\nthis\u2026<\/p>\n
The first four men (the poorest) would pay nothing
\nThe fifth would pay $1
\nThe sixth would pay $3
\nThe seventh would pay $7
\nThe eighth would pay $12
\nThe ninth would pay $18
\nThe tenth man (the richest) would pay $59<\/p>\n
So, that’s what they decided to do.<\/p>\n
The ten men drank in the bar every day and seemed quite happy with the
\narrangement, until one day, the owner threw them a curve ball. \u201cSince you
\nare all such good customers,\u201d he said, \u201cI’m going to reduce the cost of your
\ndaily beer by $20.\u2033 Drinks for the ten men would now cost just $80.<\/p>\n
The group still wanted to pay their bill the way we pay our taxes. So the
\nfirst four men were unaffected. They would still drink for free. But what
\nabout the other six men ? How could they divide the $20 windfall so that
\neveryone would get his fair share?<\/p>\n
They realized that $20 divided by six is $3.33. But if they subtracted that
\nfrom everybody’s share, then the fifth man and the sixth man would each end
\nup being paid to drink his beer.<\/p>\n
So, the bar owner suggested that it would be fair to reduce each man’s bill
\nby a higher percentage the poorer he was, to follow the principle of the
\ntax system they had been using, and he proceeded to work out the amounts he
\nsuggested that each should now pay.<\/p>\n
And so the fifth man, like the first four, now paid nothing (100% saving).
\nThe sixth now paid $2 instead of $3 (33% saving).
\nThe seventh now paid $5 instead of $7 (28% saving).
\nThe eighth now paid $9 instead of $12 (25% saving).
\nThe ninth now paid $14 instead of $18 (22% saving).
\nThe tenth now paid $49 instead of $59 (16% saving).<\/p>\n
Each of the six was better off than before. And the first four continued to
\ndrink for free. But, once outside the bar, the men began to compare their
\nsavings.<\/p>\n
\u201cI only got a dollar out of the $20 saving,\u201d declared the sixth man. He
\npointed to the tenth man,\u201d but he got $10!\u201d<\/p>\n
\u201cYeah, that’s right,\u201d exclaimed the fifth man. \u201cI only saved a dollar too.
\nIt’s unfair that he got ten times more benefit than me!\u201d
\n\u201cThat’s true!\u201d shouted the seventh man. \u201cWhy should he get $10 back, when I
\ngot only $2? The wealthy get all the breaks!\u201d<\/p>\n
\u201cWait a minute,\u201d yelled the first four men in unison, \u201cwe didn’t get
\nanything at all. This new tax system exploits the poor!\u201d<\/p>\n
The nine men surrounded the tenth and beat him up.<\/p>\n
The next night the tenth man didn’t show up for drinks so the nine sat down
\nand had their beers without him. But when it came time to pay the bill, they
\ndiscovered something important. They didn’t have enough money between all of
\nthem for even half of the bill!<\/p>\n
And that, boys and girls, journalists and government ministers, is how our
\ntax system works. The people who already pay the highest taxes will
\nnaturally get the most benefit from a tax reduction. Tax them too much,
\nattack them for being wealthy, and they just may not show up anymore. In
\nfact, they might start drinking overseas, where the atmosphere is somewhat
\nfriendlier.<\/p>\n
David R. Kamerschen, Ph.D. \u2013 Professor of Economics.
\n_______
\nShare this article with your friends if you liked it!<\/p>\n","protected":false},"excerpt":{"rendered":"
The Tax System Explained in Beer JANUARY 12, 2012 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\u2026 The first four men (the poorest) would pay nothing The […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"_links":{"self":[{"href":"https:\/\/davesdailyquotes.com\/index.php?rest_route=\/wp\/v2\/posts\/17475"}],"collection":[{"href":"https:\/\/davesdailyquotes.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/davesdailyquotes.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/davesdailyquotes.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/davesdailyquotes.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=17475"}],"version-history":[{"count":3,"href":"https:\/\/davesdailyquotes.com\/index.php?rest_route=\/wp\/v2\/posts\/17475\/revisions"}],"predecessor-version":[{"id":17478,"href":"https:\/\/davesdailyquotes.com\/index.php?rest_route=\/wp\/v2\/posts\/17475\/revisions\/17478"}],"wp:attachment":[{"href":"https:\/\/davesdailyquotes.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=17475"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/davesdailyquotes.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=17475"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/davesdailyquotes.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=17475"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}