Sunday, October 19, 2008

One of those poignant forwarded thingies

I got this as a forward from my uncle. There is no real attribution to its origins (so sorry for busting your copyright, whomever wrote it). However, it is a pretty exact model of how our tax system works. Feel free to call it a straw man... but do the math. It isn't quite as made of dried grass clippings as you would claim it is.

I have one and only one criticism of this: it uses tax cuts as the example... and I just don't see any of those coming anytime soon.

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 pay $5 instead of $7 (29%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 $50 instead of $59 (15% 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 $9.

'Yeah, that's right,' exclaimed the fifth man. 'I only saved a dollar, too. It's unfair that he got nine times more than I!'

'That's true!!' shouted the seventh man. 'Why should he get $9 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, 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.


Og Make Blog said...

I received the same email about 2 years ago and loved it. No straw in there at all. The amounts are about correct (maybe just a little low) and drives home the point that around 40% out there pay no taxes at all. However, if you ask people if their taxes are too high, everyone will answer to the affirmative ... yes, especially that 40%!

To that I answer, Bullshit! (thanks, P&T)
If they are too stupid and arrogant to realize they have been coddled and given a free ride, they lose the right to vote. Just remember, everyone, that these ignorant masses will be electing the next President and Congresscritters (and they are the prime target of the voter registration efforts such as ACORN.)

No sympathy here from the ninth man. (Don't listen to me, though... I'm just 'Lucky' according to them ... didn't work for it at all.)

Spork In the Eye said...

I must admit (full disclosure) I paid zero taxes [see note] last year... and probably will end up the same this year.

...Of course, this has to do with earning zero dollars worth of income too (ignoring interest and damn if I am selling anything to get capital gains).

[Note 1] I say zero taxes, which should be interpreted to be zero INCOME taxes. I still pay plenty of other taxes.

Spork In the Eye said...

oops. I missed the P&T reference! That's just about my favorite show.

Og Make Blog said...

You should at least earn a smidgen of taxable income in order to qualify for the EIC giveaway ... free gubment money courtesy of me and a few others. You are missing out... get yours (uh, mine) while you can!

P&T have done a good job with their show. I have the same ambivalence about NASA (saw a good bit of the inside of the NASA organization [disorganization?] some years ago.) Most folks probably don't realize that P&T are about the most rational and patriotic guys out there in showbiz ... seeing their Vegas show might help. They even run out and try to talk to everyone as the crowd exits. When I saw them, we got an extra sincere discussion as Teller remembered the F/A who was on the flight when his parents were being flown somewhere during his mother's final days.

Spork In the Eye said...

Teller speaks!?!?!

Og Make Blog said...

Ooops... maybe I wasn't supposed to say so???

Anonymous said...

Thought you might like that as I did.

Back to the Greenspan comments. "People disappointments" are always the worst kind. Knowing a little about him and where I thought he was coming from in his core values, his testimony to congress that he had been holding to a "flawed world view" is about the lamest statement I ever heard. As you suggest, his supposed world view as his behavior over a period of years must have created enuf cognitive dissonance to trip a whole bank of circuit breakers!