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Old 10-23-2008, 11:17 AM   #1
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Taxes explained for Joe Six Pack

Quote:
U.S. Tax system explained in terms of beer - to make it more manageable:

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 (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, 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.
I've been looking all over for this.

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Old 10-23-2008, 12:01 PM   #2
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That's outstanding!

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Old 10-23-2008, 12:02 PM   #3
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Great read, Skeet. Love it. Do you have any idea who wrote it because I would love to post it on my writer's board?
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Old 10-23-2008, 12:45 PM   #4
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Great read, Skeet. Love it. Do you have any idea who wrote it because I would love to post it on my writer's board?
David R. Kamerschen, Ph.D.
Professor of Economics
University of Georgia
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Old 10-23-2008, 12:47 PM   #5
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Thanks Scout... I'm off to bug some people.
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Old 10-23-2008, 03:34 PM   #6
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Very cool.

Too bad it won't make a dent in "their" thought process...
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Old 10-23-2008, 04:50 PM   #7
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Too bad it doesn't take into consideration that a corporation is considered as an individual for the purposes of taxation. That would be the eleventh citizen.

What would be really great is to eliminate the loop holes and simplify the tax code so we actually had some idea what was being payed and who was footing the bill. Doesn't Mr. Forbes make an issue of this?
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Old 10-23-2008, 05:19 PM   #8
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Too bad it doesn't take into consideration that a corporation is considered as an individual for the purposes of taxation. That would be the eleventh citizen.

What would be really great is to eliminate the loop holes and simplify the tax code so we actually had some idea what was being payed and who was footing the bill. Doesn't Mr. Forbes make an issue of this?
So how much beer did the corporation drink???
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Old 10-23-2008, 05:31 PM   #9
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So how much beer did the corporation drink???
We'll need a government works program to build a computer big enough to figure that out.

Guess who gets the tab for that?
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Old 10-23-2008, 05:40 PM   #10
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I'm thinking a bipartisan investigative committee should be able to get to the bottom of that. I'll head it up, but it could take 5-10 years of good, solid, hard drinking to get the answer.
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Old 10-23-2008, 06:17 PM   #11
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Hmmm...... Let's see now......

Corporations are taxed as "individuals"........

We raise the tax burden on corporations to 50%........

Corporations pass the tax burden on to consumers......

So when we "screw" the corporations, who really gets to take it in the a$$?
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Old 10-23-2008, 06:47 PM   #12
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We raise the tax burden on corporations to 50%........
To answer your question, the individual that does not have organized representation and/or is not involved.

Tell me about the 50%. I hear 35% tossed around, but it does not factor in loop holes and tax shelters. What you sometimes see demonstrated is that when it all comes out we have a competitive tax rate, when you factor in infrastructure and some positives in workforce.
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Old 10-23-2008, 08:51 PM   #13
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Again, corporations do not pay taxes.
Business always passes expenses on to the customer, that's the way business works, so when you raise taxes on any business what you're actually doing is raising taxes on their customers.
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Old 10-23-2008, 09:04 PM   #14
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And this all comes from someone who wanted to know what "windfall profits", meant...
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Old 10-23-2008, 09:15 PM   #15
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If you're referring to me. I was asking what you guys who were decrying windfall profits defined "windfall profits" as.
Considering the oil companies make a considerable effort and take considerable risk to search out and extract oil, considering they only make about 8% profit which is generally considered a low profit margin, I would hardly consider their profits "windfall".
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Old 10-24-2008, 01:37 AM   #16
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To answer your question, the individual that does not have organized representation and/or is not involved.
So you're saying that involved union members will pay less for the products produced by the corporations? Are they going to start checking for union cards at the market?

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