tlambert
PMA Member
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!'
'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, 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.
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!'
'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, 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.
