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Economics 101…Plain and Simple August 2, 2011

Posted by seeineye in : Politics , add a comment

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 $80.00

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!’

‘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 man 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