The tax system explained in beer!


I saw this on my sisters face book page and it got me thinking about a few things. So thanks to my sister for letting me think about this and make it a blog post.

The 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 ric
hest) 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 ball. “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 men would 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 ? 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 a higher percentage the poorer he was, to follow the principle of the tax system they had been using, and he proceeded to work out the amounts he suggested that each should now pay.

And so the fifth man, like the first four, now paid nothing (100% saving).
The sixth now paid $2 instead of $3 (33% saving).
The seventh now paid $5 instead of $7 (28% saving).
The eighth now paid $9 instead of $12 (25% saving).
The ninth now paid $14 instead of $18 (22% saving).
The tenth now paid $49 instead of $59 (16% saving).

Each of the six was better off than before. And the first four continued to drink for free. But, once outside the bar, the men began to compare their savings.

“I only got a dollar out of the $20 saving,” 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 benefit than me!”
“That’s true!” shouted the seventh man. “Why should he get $10 back, when I got only $2? The wealthy get all the breaks!”

“Wait a minute,” yelled the first four men in unison, “we didn’t get anything at all. This new tax 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 their 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 government ministers, is how our tax system works. The people who already pay the highest taxes will naturally 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.

Ok now I have to say that I have my own thoughts about this whole thing. Most people who are at the top are not as understanding of the Dollar. I think that some of them think that money really grows on trees. They are more likely to feel like they can throw  it away.  I’m not saying all people are like this but there are a great many people who  do it and don’t even know they are doing it. I also believe that people who are at the high end of taxes have a better education. They are able to fight the holes in the system. They have the understanding of were they can go to get out of paying.

Again some people at the bottom like me try to make a dollar  go as far as they can make it go. I don’t have the education of the tax system to know were my money can go to get out of the tax system so I don’t have to pay. I can’t get the money together to be able to move up into the middle tax place. I have more medical expenses then a lot of the people in the top of the tax system. I have worked very hard for my little bit of money that I have. As some would say I have “new money”, I have worked very hard for it.  How many people in the top of the tax system are using “new money” or are they using “old money”. How many people can say they have “worked” for there money and not just had others work for them. So I think that even though I am posting this I don’t think it’s right. I think that people who are at the should have to pay a bit more. If it’s wrong ok I understand.


3 responses »

  1. Interesting perspective. Here is some food for thought and a different break down. Say I earned $200,000 last year and Dad earned $20,000 last year. Each of us had to pay taxes. Dad had to pay 17% and I had to pay 40%. I paid $40,000 and Dad paid $3400. This is the tax scenario I live with. We work hard for our money. We are generous with our earnings to our family, the church and other not for profits. On top of this we pay close to 40% in taxes and are not allowed to deduct any education expenses, childcare expenses, or other expenses most are eligible for. I don’t disagree that the tax system is confusing and punitive, it is that way for all, even those who have money.

    • Thank you for commenting about this post. I know, you have worked hard for the money that you have today. As my sister and I think I can say I know you pretty well I hope. So I can see were you are coming from I think. I know that YOU have worked very hard for YOUR money. Do you remember how to make the dollar go as far as it can? “WAIT”, I know were you shop and I know you can make a dollar go very far, your are my sister. Why can you not take the education deduction or childcare expenses deduction? Is it because you make to much money? I am very happy for were you are today.

      And now you know were I stand on this thing. Right or wrong I don’t know, however now you know why I don’t like talking about this at family get togethers. I never thought I would be talking about this to you. I know you should not talk about the Big 3 at work But not being able to talk about the BIG 3 with family is a whole different thing.

      Thank you so much for your comment again. I LOVE YOU so much because you are my SISTER. There are things that we are not going to ever see eye to eye on just like Mom and Dad. I hope you don’t see it as a point to get mad at me. I hope you see it from were I come from in the food chain of Tax system.

  2. Beans taxes are complicated. I am not mad at you, but I do wish that you would understand that higher taxes for the rich doesn’t solve the economic problem. Under the proposed tax increases I fall under the “rich”. My tax rate goes from 30% to 39.6%. We paid over $1450k in taxes last year. I worked an average of 78 hours per week. When tax season rolls around we cringe. This year we will pay almost 40% of what we earned to the government. According to the tax rules we are too “rich” to deduct almost anything. I cut coupons, I help Mom, Dad, sometimes you, Grandma and donate to the church and to other organizations that help those who are not as blessed. So to hear it is unfair, or that we don’t watch what we spend, or we don’t do our share is like me telling you I understand what it is like to live with a disability. The truth is it is easy to criticize from the outside looking in. My hope is that the next time before you make blanket statements about the “rich” you might want to research who is funding the scholarships to universities, supporting the United Way, Red Cross, school programs, food shelves and other organizations that are not fully supported by the government. When the rich pay higher taxes we have less to give freely to the causes we believe in and the government gets to decide what our money supports and generally it is their own paychecks not the greater good.

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