Wednesday, November 28, 2007

Basic explanation of the US tax system

Full disclosure: I got this in an email. It's a fantastically simple explanation of the United States Tax system, and deserves to be read.
And if nothing else, it is my first post ever involving alcohol on this blog.

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!" "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.

26 comments:

SolaMeanie said...

Did beer have to be the example? Why couldn't you have settled for a nice Pinot Noir? :D

Just kidding.

Love this example. It does nail it in the bullseye.

Kingdom Advancer said...

Great post!

Palm boy said...

Joel, lol.

KA, thanks!

Anonymous said...

Wow, I can't believe I missed your other two posts. It's great to by reading you again.

As for this one, it's great. When I was reading it I thought, "Those are 10 of the dumbest men. And America is just like them." Funny as the example is, I was more shocked at its truth than anything else.

Um, I've got a question. I'm rather humiliated to have to ask this, since at home I'm known as the Word Smith and I study my dictionary fully as much as my Chem, but I'm also desperately curious, so...what DOES "lol" stand for?

Jeana (previously the Spectacled Skeptic)

Anonymous said...

Most excellent example....I love how an analogy can get an idea across better than if you ever tried to just explain the economics to someone! Thanks for posting-

Palm boy said...

Jeana, wonderful to know your name. :D

lol = Laugh Out Loud. Some of my family members didn't know that either, so don't feel bad.

Anon 2, your right. I think thats why Jesus spoke in parables quiet a bit.

Anonymous said...

Laugh Out Loud, okay, got it. Thanks for putting me out of my misery! lol :D

Sorry to have to bust your bubble, but Jeana is just another nickname. My Brother (Ace), the WWII expert, was the cause for the change. He insisted that the intials S.S. put me in the Nazi catagory. He demanded I choose a different name, to be approved by him. Of all the bossy younger brothers! Jeana was fine with him because everyone calls me that, but he would have prefered Gimli, saying that I look the most like that LotR character! I am short and do have a red head, but I AM NOT cross eyed nor do I wipe my face with a non-existant beard. So there, Ace.

Jeana

Kingdom Advancer said...

I caught on to LOL pretty quickly when I started blogging. What took me forever to figure out, however, was ROTFL (rolling on the floor laughing) and IMO (in my opinion).

Jeana, the key points of comparison are: do you belch loudly after guzzling a whole pint of beer, and are you very dangerous over short distances? :)

Anonymous said...

I most certainly do not "belch loudly after guzzling a whole pint of beer." Beer is disgusting. I firmly believe that guzzling is impossible without a beard. AND I rarely belch, except, interestingly enough, after yawning. I think it has something to do with how air is caught in my throat.

As to "very dangerous over short distances" well, yes, I am. But I also can be dangerous over long distances, depending on what gets my ire up. (Internet could really help over the long distances. :D)

So does the comparison hold?

Jeana

Kingdom Advancer said...

Let's see. Are you competitive when it comes to slaughtering less-than-human organisms? And do you conflictingly like and dislike somewhat non-masculine elves?

Palm boy said...

Cracking up @ non-masculine elves.

Anonymous said...

Sadly, no, I am not "competitive when it comes to slaughtering less-than-human organisms" the only orcs around here being the less-than-civil neighbor kids. The unfortunate part is that I have been taught to be kind, so I have to limit myself to ignoring them.


A definite “no” to "conflictingly like and dislike somewhat non-masculine elves." I like all the elves in my acquaintance. Though I must agree, sometimes they are disappointingly “non-masculine”. For instance, when I, the girl with bigger, stronger (albeit younger) brother, have to kill and clean up the invading spider.

Jeana

Kingdom Advancer said...

I would have to say, then, unless you have lived in the Mines of Moria, you probably are not very comparable to Gimli.

Of course, if you HAVE lived in the Mines of Moria, I might be suspicious that you are a strange, small, internet-using Balrog. Although, it would be more likely that you are a baby cave-troll trying to stay out of the sun.

Anonymous said...

Ha, I am neither, 'cause I live in Helm's Bleak (named for Helm's Deep and Charles Dickens' novel "Bleak House").

Jeana

Kingdom Advancer said...

That sure sounds like a Shire-ish name for a place. Are you sure you are not a hobbit? I'd peg you as a Proudfoot.

Palm boy said...

Proudfeet!

Anonymous said...

Humm, looking in the mirror: curly hair (real), pointy ears (pretend), blue eyes (real, I wish), short (real), hairy feet (real with my woolly socks on)

So far so good, but I'm afraid you'll have to peg me to another hobbit family. The Proudfoots--Proudfeet, begging your pardon, Palm Boy--are terribly predictable and proper. No one has ever accused me of either. I enjoy going my own way whether it's predictable and proper or not. Usually it's not.

Jeana

Kingdom Advancer said...

Well, I guess if you don't want the hairy feet, then you can't expect to have the blue eyes.

Technically, Palmboy, you can call someone a "Proudfoot." You just can't call a group of them "Proudfoots."

Anyways, my knowledge of the hobbit clans ends about there, but if you want to switch sci-fi fantasies, as a short creature, could you be a Jawa? :)

Anonymous said...

Jeana the Jawa.

Jawa?

What's a Jawa? I don't believe I've ever met one before. What sci-fi fantasy did it come from?

So I'm not a hobbit. That is indeed sad. Boohoo. I would gladly put up with hairy feet to have blue eyes.

Jeana

Kingdom Advancer said...

Palm Boy might be better at defining a Jawa (sounds like: Jaw-wuh) than me. But, essentially, they are from Star Wars. They are short creatures from the planet Tattoine. I believe they repair and sell robots.
They wear cloaks with hoods, so that you can't see their faces. All you see is blackness--kind of like wraiths--only with glowing eyes....I think....

But, if you really want to be a hobbit, I guess you can. It's like the Steven Curtis Chapman song: "Hobbitness is All in the Heart".......or something like that. :P

Palm boy said...

Well done, defining Jawa.
http://www.starwars.com/databank/species/jawa/

They are rather unpredictable and independent.

Anonymous said...

I've watch some of the Star Wars, but I really can't recall any Jawas. In fact, the only thing I can remember from the ones I did watch (three I think) was being irritated at Harrison Ford (who played what-his-name Skyflier or something like that) for saying "I know" to the girl (Lisa? Lona?) when she finally confessed she like him. The IDOT, he at least could have told her that he liked her too, but no, he KNOWS she loves him. I also think something bad was about to happen, and to him.

Oh, and I remember being amused by the tin man and his side kick, the trash can.

But this is beside the point. I think the strange little Jawa probably fits me like a glove, so thanks for classifying me.

Jeana Jawa :D

Kingdom Advancer said...

Princess Leia.

Personally, I kind of like Han Solo's (Harrison Ford's character) cockiness--not because I'm like that, just because I find it amusing. :)

Anyways, I feel that if someone can't have two names with the same amount of syllables and ending with the same vowel sound (like "Jeana Jawa"), their lives just can't be as happy. I need one: Kingdom Advancer Kingdom the Prancer?

Okay....never mind.

Anonymous said...

As you see, I haven't the least idea what Star Wars is all about. I might find Hans Solo's (thanks for the gentle correction)"cockiness" amusing now, but at fourteen (when I saw it) everything had to "right" in books and movies. If it wasn't "right" they were idiots (note: not idots). LOL

Oh well, I want to be happy so out goes the Jawa. Any road, I always thought (springing from some of my dingbat moments) that I am related to Perigrin Took. And a Took in one's name would have the added advantage of sounding like a pun: Jeana Took the book, or something like that.

Oh my, that was bad. Ah better git ma weary bones ta bed before Ah really make a dumb joke.

Jeana

Palm boy said...

You two crack me up.

Lillgw said...

It should be simple to fix this problem. The rich are paying the poor entirely too much to defend this country.