The beer theory of taxes

Sadie got this in an email and posted it as a comment.  It’s too good, though, not to get wider play.  The beer theory of taxes explains just about everything that’s wrong with a system that drives away the wealth:

THE TAX SYSTEM EXPLAINED IN BEER

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 ball.
“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 men would 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? 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 a higher percentage the poorer he was, to follow the principle of the tax system they had been using, and he proceeded to work out the amounts he suggested that each should now pay.

And so the fifth man, like the first four, now paid nothing (100% saving).
The sixth now paid $2 instead of $3 (33% saving).
The seventh now paid $5 instead of $7 (28% saving).
The eighth now paid $9 instead of $12 (25% saving).
The ninth now paid $14 instead of $18 (22% saving).
The tenth now paid $49 instead of $59 (16% saving).

Each of the six was better off than before. And the first four continued to drink for free. But, once outside the bar, the men began to compare their savings.

“I only got a dollar out of the $20 saving,” 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 benefit than  me!”

“That’s true!” shouted the seventh man. “Why should he get $10 back, when I got only $2? The wealthy get all the breaks!”

“Wait a minute,” yelled the first four men in unison, “we didn’t get anything at all. This new tax 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 their 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 government ministers, is how our tax system works.
The people who already pay the highest taxes will naturally 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.

The whole thing is also a ready-made argument for flat taxes, isn’t it? Things seem more fair when everyone pays an equal percentage.

Incidentally, at lunch today, Don Quixote pointed out that with the American rich getting visibly richer, and those who are not rich feeling as if they’re falling behind, it would behoove the rich to put back into the system.  Even if the poor’s perception of their poverty is historically incorrect (insofar as the American poor enjoy a higher standard of living than the poor in other parts of the world or other times in history), we know from past experience (the French, Chinese and Russian Revolutions spring to mind), that if the people feel the chasm is too deep, a small cadre of Leftists can manipulate them into startling acts of violence and tyranny.

The problem is that the OWS crowd, and Leftists generally, want the rich to be forced to put back into the system by having the government grab money from their pockets, a tactic that only drives them away.  (See beer example, above.) If it were up to me, I would rejigger our system so that there are fewer barriers to the rich investing their money in America.  I would lower government hurdles that currently make it ridiculously difficult to build factories, hire workers, construct roads, and bring products to market.  That would make India and China look a whole lot less enticing, keeping wealth within America, so that there’s more to spread around.

Be Sociable, Share!

Comments

  1. suek says

    I saw this same joke (?) some years ago – maybe 2004 or 2008 – and I’m certain I saved it – somewhere!  Well, actually, not exactly the same – it was five men, I think, and going out to dinner, not for beer.  But the math was basically the same, and the outcome was the same as well.
     
    I’ve been trying to find it to post, but unfortunately saving stuff on a computer isn’t of much use if you’re not especially organized – and work on more than one computer!
     
    I’m glad Sadie posted it – it’s a pretty short and sweet explanation of “Going Galt”…

  2. Spartacus says

    “Suppose that every day, ten men go out for beer and the bill for all ten comes to $100…”
     
    This was just such a happy thought that on my first time through, I just stopped reading right there and went on to the next post, on the theory that it’s best to quit while you’re ahead.
     
    Of course, curiosity got the better of me, and I had to come back and finish reading.  And now, every time I read a discussion on tax policy, I’m going to become extremely thirsty.
     
    [sigh]

  3. jj says

    The obvious thing to do is turn the USA into a tax haven, corporately and individually.  The problem is, no one’s ever been able to successfully explain to liberals that 15% of something is better than 90% of nothing – it just doesn’t penetrate.
     

  4. JKB says

    I would lower government hurdles that currently make it ridiculously difficult…

     Book, I’m surprised at you.  You know if we streamline any regulation, reduce any fee, toss out any outdated mandate that the corporations will be free to exploit us.  That children as young as 7 will be working the looms.  That widows will be charged for the material lost when their husband fell to his death into his machine.  Goldman Sachs will no longer be restrained in the financial schemes they can run to imperil our world.

    And if you don’t know that, wait a bit, there will be a Lefty along to enlighten you.  At least that was the actual responses I got when I wondered why the protestors weren’t demanding streamlined regulation and reduced fees for business creation so they could escape the evil clutches of the corporation as master. 

  5. JKB says

    In comment to “ Don Quixote pointed out that with the American rich getting visibly richer, and those who are not rich feeling as if they’re falling behind, it would behoove the rich to put back into the system.”

    Isn’t it odd that they only resent the rich who earn their riches by building things, creating things or facilitating such.

    Isn’t it odd they don’t seem to resent the rich Hollywood stars, who owe their riches more to luckily being given their big break when compared to the other talents who don’t make it.  Or the sports stars, who owe their riches more to their lucky natural talents.  

    Isn’t it odd they seem to resent those who got their riches by persistence, hard work and a willingness to take a risk.   Could it be that they don’t like seeing someone succeed by putting off immediate gratification, working hard everyday and putting their very home on the line?  

    Someone had a link a few days ago about a OWS protester who complained that they couldn’t get their message to the Wall Streeters because the finance types had been at work for 2 hours by the time the protester showed up at 9 and they worked long after the protesters headed home in the evening. 

  6. suek says

    >>Could it be that they don’t like seeing someone succeed by putting off immediate gratification, working hard everyday and putting their very home on the line? >>

    There’s also the perception that the guy in the office pushing paper – even for long hours each day – doesn’t work as hard as the guy in the hard hat, or the guy in the field picking fruit or vegetables. And no doubt there’s some truth to that – the labor is different, even if the hours are the same. I don’t know quite how to counter that – but if it’s so much easier, and they earn so much, why isn’t everybody doing it??

    We know the answer – why don’t they?

Leave a Reply