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i drink alone.
Our Tax System Explained: Bar Stool Economics
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 paid $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 got"
"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, ladies and gentlemen, 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.
David R. Kamerschen, Ph.D.
Professor of Economics
University of Georgia
i drink alone.
I don't drink.
<-- drunk
actually it can be put in simpler terms.
THe harder you work and the more you make, the more the govt wants to discourage you from making more.
Does that include payroll taxes?
Nope, people dont have sympathy for employers.
FICA Match, FUTA and SUI.
I only drink when I'm alone or with somebody.
Ain't that the truth.
...thank you, for posting this. i am so tired of hearing people/posters talk about the tax system, most people don't know . ing idiots.
Yeah, that is a wonderful analogy, and it would make sense if the divide between the rich and poor wasn't continuing to grow (see the GINI index).
"Between 1979 and 2005, the mean after-tax income for the top 1% increased by 176%, compared to an increased of 69% for the top quintile overall, 20% for the fourth quintile, 21% for the middle quintile, 17% for the second quintile and 6% for the bottom quintile."
http://en.wikipedia.org/wiki/Income_..._United_States (don't dismiss this just because it is a wiki - it is well researched from credible sources).
So, actually, unsurprisingly, income earned by top earners is increasing at a far faster rate than that of the majority. Poor rich people!
That is sooooo naive.
So, the guy who works 60 hours a week in 2 minimum wage jobs just to keep a roof over his family's head is discouraged from working harder because of the tax system? Bull , he HAS to work like that because otherwise his world comes crashing down.
Interestingly though, the tax system ends up disadvantaging middle income earners proportionately more than it does high income earners! Here are the 2008 US federal income tax brackets for single income earners (for simplicity):
10% $0 – $8,025
15% $8,026 – $32,550
25% $32,551 – $78,850
28% $78,851 – $164,550
33% $164,551 – $357,700
35% $357,701+
http://en.wikipedia.org/wiki/Income_..._and_tax_rates
When I look at those brackets, it's not the rich who get smacked, it's the MIDDLE INCOME EARNER. Earn over 32K and your marginal tax rate goes from 15% to 25%, a 66% increase. From 79K up to 358K the marginal rate only increases from 28% to 35%, a 25% increase.
Sorry, who gets slugged again?????????
Try examining the facts.
Try paying the taxes I have to.
paying 35% that goes wasted is absolute horse .
On top of paying California Income, Arizona income......
That would make more sense to me if I hadn't had less than $8000 on my 2006 return and still owed $500 because some of that was untaxed contract work for a nonprofit org. Or if I wasn't getting taxed on a federal ing scholarship this year and consequently getting all of a $3 refund (which I am making the feds pay postage on to mail me, direct deposit) when my real income was less than $14k after living most of the year at $800/mo with AmeriCorps.
Apparently the government just doesn't want me to keep any of my money.
So, do you go wanting for anything? I doubt very much that you do.
Unfortunately, there are a lot of people out there who find it hard just keeping up with their bills, and as I have pointed out it is the MIDDLE CLASS who are increasingly being squeezed. Excuse me for not feeling sorry for the rich that they have to pay proportionately more of their high income to fund the infrastructure that keeps society running.
BAAMMM!!....not only that rich corporations like Walmart profit more when they pay low employee wages, then the employees have to go on food stamps, CHIPS, or other govt. sponsored program and that bill gets passed to all of us...
BAMM!! Corporate subsidy!
Those in the high income bracket, whether they get tax hard or tax breaks, the value in the dollar of their purchasing power is different to someone on the low income scale.
At the end of the day its about good fiscal policy from the govt, where tax increases/breaks should be handed out to.
You consider 79K to be "rich"?
So they are worthy of getting punished?
79K in australia is top tier if im not mistaken around 42-47% tax bracket,
huh? i disagree. furthermore, http://www.thesimpledollar.com/2007/...-more-cowbell/
I hope you are joking.
Welcome to reality.
Well, I was referring to SS and Medicare taxes paid by employees.
the analogy was good for what it was. Of course many of you have a hard time reading. The analogy was meant to point out the foolishness of class warfare when it comes to tax cuts. On a percentage basis the wealthy usually get less than everyone else. Percentages are all that should matter.
As far as Ruff's commentary, I stopped reading once I saw Wikipedia as a source. You may have some good points, but you shot your credibility.
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