The Reality of "Tax Cuts for the Wealthy"

[LittleRedToyota]

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:

1. The first four men (the poorest) would pay nothing.
2. The fifth would pay $1.
3. The sixth would pay $3.
4. The seventh would pay $7.
5. The eighth would pay $12.
6. The ninth would pay $18.
7. 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:

1. The fifth man, like the first four, now paid nothing (100% savings).
2. The sixth now paid $2 instead of $3 (33%savings).
3. The seventh now pay $5 instead of $7 (28%savings).
4. The eighth now paid $9 instead of $12 (25% savings).
5. The ninth now paid $14 instead of $18 (22% savings).
6. 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 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.

David R. Kamerschen, Ph.D.
Professor of Economics
University of Georgia

For those who understand, no explanation is needed.

For those who do not understand, no explanation is possible.

[-JD-]

Great find LRT.

And I bet the 10th guy didn't get a pint more than any other. Probably was a microbrew though.

[LittleRedToyota]

And I bet the 10th guy didn't get a pint more than any other. Probably was a microbrew though.

actually, if you stick with the taxation analogy and then extend it to how those taxes are used to provide government services...

the rich guy got a half a pint of natural light while the poor guys each got six pints of guiness.

[Koli01]

Excellent post.
Would send rep. but must spread the love.

[625]

Best explanation of what we have going on that I've seen. Good find. I'll have to save a copy of this.

[adymond]

Rep sent. Great post.

[stevieb92]

Rep sent. Great post.

Ditto on that. Explains things in real terms most can understand.

[Lysander]

Must share the love before rep can be sent. Consider it "on account".

[ALS]

The problem in this country is the average voter is an absolute moron and thinks the rich guy should pay every ones taxes. Well as long as Government demonizes wealthy people they will leave with their money to places that want them.

I bet there are 34 unhappy people that use to work for the City of Pittsburgh School district today. 21 of those who were given pink slips last week were teachers.
Now that people no longer want to raise their kids in the city and county that taxes people to death. The city schools had to eliminate 183 jobs. No money since more and more people who make a good living are leaving the city as well as the county.

I read last week that Dan Onorato said if the drink tax was voted down he would have to raise property taxes 20%. Well isn't that special!!!
Something Dan and the rest of the politicians in Allegheny county would like to tell us ? Like the property values are dumping in this county because of the exodus of more and more taxpayers.