105 replies to this topic

[Che'_Moderator]

TAX SYSTEM - EXPLAINED IN BEER

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 one 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 one stinking dollar, too..

It's unfair that he got ten times what I got!' ''That's true!!' shouted the seventh man. 'Why should he get $10 back when I only got 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 the bill!

And that, boys and girls, 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.


For those who understand, no explanation is needed.

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

[JCviggen]

If you turn it around and increase taxes in the above example instead of reducing them it works a little better, but its a nice example still.

Of course the problem is that a lot of money has already been spent over the years which wasn't really there in the first place. So either taxes need to increase or spending needs to be cut in a drastic way which is likely not acceptable either. The hole is there and will need to be filled somehow. Rock, hard place. The era of writing checks no-one ever cashes may be coming to an end..

[flyfishing3]

flat tax or sales tax.

[Pops Racer]

flat tax or sales tax.

+1

Good illustration Charles, gets it down to the average guys world.

Obvious solution ( to me)is to cut spending not increase taxes.


Giants > Steelers! SOme kinda defensive game, huh? And did you catch them brook trout in WV?

Edited by WINGNUT, 27 October 2008 - 03:11 PM.

[cheapwagon]

Great read. Now I don't have to have Palin try to explain this today when she comes to town. Go McCain!

[Che'_Moderator]

+1


Obvious solution ( to me)is to cut spending not increase taxes.

Ok lets view the economy as 4 people. Lower, middle, upper, and GOV. Why should the gov make less money because the other three people cannot seem to manage theirs. "We" bitch about the national dept, but then turn around and bitch about taxes. Tax cuts for people who do not pay taxes do no make sense. Ans while the easy answer is "tax the rich, you cannot bite the hand that feeds you. There needs to be change all around.

[Pops Racer]

The govt employs too many people, runs too many operations that should be at the state or private level, and is such a huge ball of red tape they can not help but waste, lose, or fraud away money. Smaller govt is easier to oversee. And exponentially cheaper to operate. I refer you to the Constitution.

They are supposed to work for us, not the other way around. I can dream, can't I?

Heres another example like Chuck's:

ECONOMIST MODELS GRADE SYSTEM AFTER OBAMA’S TAX PLAN
In the Oct. 10 presidential debate, a dialogue between Democratic nominee Barack Obama and an Ohio man known as Joe the Plumber at a rally came up.
The plumber complained he had worked very hard and hoped to buy his employer’s business, only to have Sen.
Obama tell him he must be willing to pay higher taxes to be fair and “spread the wealth around.”
As an economics professor, I, too, have decided it’s time for a change. In this regard, I have explained to my students my new grading system : Earned grade : 40-49 plus 25 points; 50-59 plus 20 points; 60-69 plus 15 points; 70-79 plus 10 points; 80-89 plus 5 points; and 90-100 minus 10 points (top 5 percent of students).
As the grading scale indicates, 95 percent of my students will get a “grade break” while only the top 5 percent will be penalized. Thus, the less productive students who miss class and study less will have an incentive to remain less productive, while the better students who come to class more often and study harder will be encouraged to be less productive.( my accent)
The effect of this policy should be to make all of my students’ knowledge of economics mediocre. But by “spreading the grades around” this way, students will think the system has treated them fairly, and I will get better student evaluations.
Can you see how great my fairness doctrine is? Maybe I should run for president. But then again, I might be too old.
James C. Loughlin, Ph.D.
New Britain

Edited by WINGNUT, 27 October 2008 - 03:26 PM.

[Fudge_Brownie]

I almost posted this the other day!

[ErikS]

- 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.

The first four drink busch light ...

The fifth gets a budweiser.

The sixth drinks a Heineken.

The seventh ... a Redhook ESB.

The eighth gets a black and tan.

The ninth ... Chimay.

The Tenth slowly enjoys a Dogfish Head 120 minute IPA and feels good about being able to enjoy the finer things in life ... and feels sorry for the poor people drinking busch light.

[Zappo]

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.

10 people on here are now trying to figure out how to get paid to drink beer.

The first four drink busch light ...

Schmitt

[Boost_Junky]

The problem with the example is that your comparing a sale to a tax. Apple vs. oranges, not the same thing.

Here in lies the problem. The man paying the majority of the beer tab would also get the majority of the beer. The other tab payers would be stock holders in the bar, in turn making a profit from the drinking. The poor would not be able to buy beer.

Let’s not leave our brothers behind to create a country between rich and poor. Let us bring our brothers with us and create a country for the all people. A country to give equal opportunity to children regardless of their parents choices or incomes. Children are innocent and disserve our best. Are we giving it to them? All of them?

Blessed are the poor, for they will inherit the earth.

[Kibim]

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

It's those who most need the explaination that will never understand it ...

[Fudge_Brownie]

Let’s not leave our brothers behind to create a country between rich and poor. Let us bring our brothers with us and create a country for the all people. A country to give equal opportunity to children regardless of their parents choices or incomes. Children are innocent and disserve our best. Are we giving it to them? All of them?

Blessed are the poor, for they will inherit the earth.

My friend Karl wants to talk to you.

It's those who most need the explaination that will never understand it ...

Once upon a time, there were literacy tests in order to vote. Some people thought they were a bad idea. I think they were illiterate.

[Boost_Junky]

My friend Karl wants to talk to you.

Humanity is not socialism.


That is the attitude that murdered the so called witches in Salem.

What good is America if our children can't compete in a global market. News flash, manual labor and entry level jobs are being out sourced and filled by immigrants. The natural progression for American children will be in technology and science. We are falling terribly behind in these subjects.

Nero watched while Roam burned. Don't bite your nose to spite your face.

[Smithwicks]

The first four drink Moutain Creek ...

fixed

i might send this example to one of my friends who is a complete socialist.

[Che'_Moderator]

The problem with the example is that your comparing a sale to a tax. Apple vs. oranges, not the same thing.

Here in lies the problem. The man paying the majority of the beer tab would also get the majority of the beer. The other tab payers would be stock holders in the bar, in turn making a profit from the drinking. The poor would not be able to buy beer.

Let’s not leave our brothers behind to create a country between rich and poor. Let us bring our brothers with us and create a country for the all people. A country to give equal opportunity to children regardless of their parents choices or incomes. Children are innocent and disserve our best. Are we giving it to them? All of them?

Blessed are the poor, for they will inherit the earth.

You're on crack my man. How many of your dollars go into say state road improvement, verse how many of mine? Same for public works. Maybe I just need the police 10 times more than you do so I should pay more? No wait. Last time I checked the highest crime was in poor areas. So GTFO.

BTW. Your area needs better schools. Roam never burned

[J0E]

Excellent post, Chuck!

[Boost_Junky]

You're on crack my man. How many of your dollars go into say state road improvement, verse how many of mine? Same for public works. Maybe I just need the police 10 times more than you do so I should pay more? No wait. Last time I checked the highest crime was in poor areas. So GTFO.

BTW. Your area needs better schools. Roam never burned

It would be easier to say I'm on crack than understand and agree with my view.

You are right, Rome burned not roam, it was a type-o. If you really don't think Rome burned, here is a link.
Great Fire of Rome

As for my area needing better schools, that is a bit crass. I could say that your area is need of better finishing. Correcting my spelling in this case in straining over a gnat while swallowing a camel.

Can you tell me the meaning behind my previously written statements? "Nero watched while Rome burned and bite your nose to spite your face." Allow me to elaborate. While the country falls into an uneducated, non competitive state, you seem to be fighting over a small change in your tax payment, while watching the country fall around you. Why cling to your tax dollar when the institution that gave you the ability or your family to earn that dollar crumbles. Are we creating an opportunity for children to succeed? Or do you have to have a wealthy family to have a chance at success? What about the American dream?

A huge misconception is that under developed nations are all poor people. In actuality they have similar ratio of wealth as us (1/10). It is our middle class that separates us, and our technology innovation. If we don't promote education and programs that give us a competitive advantage in a global market while maintaining a healthy middle class our economy will fall. We have an economy based on consumption. The consumer is the key in that equation.

Most kids today couldn’t tell me who Nero is. They wouldn’t catch that I capitalized a verb not a proper noun. They are falling behind in math and science and we are in big trouble. Unethical business practices have stifled our economy and the entry level positions these kids would be qualified for are disappearing overseas. Analysts will tell you that America doesn’t want those jobs anyway, but we are also not producing a new generation of white collar worker either.

Allow me to indulge your beer story. It is a challenge because in your example you are not talking about income, only spending. You have left out these key issues;

The guy spending the most on tax does so because he makes more money. In turn he has a higher tax bill. This is in relation to his income not in relation to the amount of resources he uses, i.e. roads, police or welfare. Although it could be argued that he does need that more. The use of such benefits him greater than the poor. It is evident in his portfolio sir. ZING

The guys spending the middle amounts on tax do so because they are in the middle income bracket. The taxes are also geared to give him deposable income which is the corner stone of our economic growth.

The poor have little income so they do not get taxed on nothing. Here is some math for you 23% of $0 = $0. By their use of police, welfare and other programs they are not hindering our society from operating as normal. Giving you, the rich, a chance to continue business as usual. How could you be successful if our entire nation was in a humanitarian crisis? You couldn’t. It’s called keeping the peace and it keeps you in business. Some of these poor may be the parents of our next great minds, if those kids are given a fair chance.

Of course the wealthy pay more taxes. My grandfather paid more tax in one year than I made in three. But he also has made more money than I make in 15 years. It’s all relative. I am a capitalist. I am an American. I want to make sure that we can stay healthy, strong and lead the world in morals, good business and technology.

Your beer example implies that we will scare the rich out of paying taxes, growing companies, creating jobs, and spending. News flash, the wealthy don’t do the most consumer spending. You may spend more than me in taxes, but you also take for granted the institution that gives you the freedom to do so. Your financial benefit is much greater than mine for the infrastructure America provides you with. That is why you pay more taxes than me.

Excellent post, Chuck!

Why is it an excellent post?

[Che'_Moderator]

I expect to pay more because I make more than you. Thats totally fair. x% of 500k > x% of 50k. NP there. But Why should I pay x% when you only have to pay y%? If we go to socialized healthcare do I get better doctors because I pay more? NO WAIT.... thats not how it works at all. I just get ass fucked and you get a free ride. PASS. The rest of my money will go off shores at that point

[flyfishing3]

The rest of my money will go off shores at that point

we're going to see more and more of that. unfortunately, thats not a joke.