the tax code in beer terms
Suppose that every day, ten men go out for beer and the bill for all ten comesto $100. If they paid their bill the way we pay our taxes, it would gosomething like this: The first four men (the poorest) would pay nothing. Thefifth would pay $1. The sixth would pay $3. The seventh would pay $7. Theeighth 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 barevery day and seemed quite happy with the arrangement, until one day, the ownerthrew them a curve. ‘Since you are all such good customers,’ he said, ‘I’mgoing to reduce the cost of your daily beer by $20.’ Drinks for the ten nowcost just $80. The group still wanted to pay their bill the way we pay ourtaxes 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 dividethe $20 windfall so that everyone would get his ‘fair share?’ They realizedthat $20 divided by six is $3.33. But if they subtracted that from everybody’sshare, then the fifth man and the sixth man would each end up being paid todrink his beer. So, the bar owner suggested that it would be fair to reduceeach man’s bill by roughly the same amount, and he proceeded to work out theamounts each should pay. And so: The fifth man, like the first four, now paidnothing (100% savings). The sixth now paid $2 instead of $3 (33%savings). Theseventh now pay $5 instead of $7 (28%savings). The eighth now paid $9 insteadof $12 (25% savings). The ninth now paid $14 instead of $18 (22% savings). Thetenth now paid $49 instead of $59 (16% savings). Each of the six was better offthan before. And the first four continued to drink for free. But once outsidethe restaurant, the men began to compare their savings. ‘I only got a dollarout of the $20,’declared the sixth man. He pointed to the tenth man,’ but hegot $10!’ ‘Yeah, that’s right,’ exclaimed the fifth man. ‘I only saved adollar, too. It’s unfair that he got ten times more than I got’. ‘That’strue!!’ shouted the seventh man. ‘Why should he get $10 back when I got onlytwo? The wealthy get all the breaks!’ ‘Wait a minute,’ yelled the first fourmen 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 mandidn’t show up for drinks so the nine sat down and had beers without him. Butwhen it came time to pay the bill, they discovered something important. Theydidn’t have enough money between all of them for even half of the bill! Andthat, ladies and gentlemen, journalists and college professors, is how our taxsystem works. The people who pay the highest taxes get the most benefit from atax reduction. Tax them too much, attack them for being wealthy, and they justmay not show up anymore. In fact, they might start drinking overseas where theatmosphere is somewhat friendlier. David R. Kamerschen, Ph.D. Professor ofEconomics University of Georgia For those who understand, no explanation isneeded. For those who do not understand, no explanation is possible.