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, 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
clever
David R Kamerschen is a very smart man….. hope he contributes more !
this is wack
ur a real phd holder sir
couldn’t have said it better
yeah a pdh holder… totally… tards…
Nevermind the fact that the reason the tenth man is so rich because he’s spent his entire life ripping off men 1-9. He gets sacks full of money shipping 1 & 2’s jobs overseas. We should tax man 10 at 95%.
I came here for a laugh, not for a lesson about the tax system.
St’v’n: lots of anger…looks like someone is guy 1-4
lol haha ok well here’s my tax system……..Buy illegal papers, pay no taxes, get ticked when i realize i have to pay taxes with the IRS pin number they give me for taxes, do my taxes and later find out i’m not elligable for tax refund because i have no social security….how do you like those apples
The pofessor fails to point out that man # 10 made more money than the rest of the men combined.
Well done, makes a good point about reality, and yet there was no mention of women whatsoever which just leaves me wondering…
Why would these guys keep going there?
St’v’n says:
January 19, 2009 at 1:53 pm
Nevermind the fact that the reason the tenth man is so rich because he’s spent his entire life ripping off men 1-9. He gets sacks full of money shipping 1 & 2’s jobs overseas. We should tax man 10 at 95%.
ever occured to you that maybe 1-4 didn’t get jobs because they figured 10 would pay for them 5-6 are lazy and don’t get payed much and 9-10 are actually hard workers
i doubt the ist 4 guyz ever got rich
wat u do is pop da rich man an take all his shiz, then u can buy all da booze ya want
Red Rivan: “wat u do is pop da rich man an take all his shiz, then u can buy all da booze ya want”
As soon as you and the rest of you Guy Number Ones out there learn how to speak English, you might actually get a decent job and not have to kill people for money!
that ìs brilliant……
If you tax that man 95% he would quite and live off the system like the first 4 lazy guys and then everone is screwed because the middle guys will just try to do the same when the taxes fall on them.
Really, really true
Clearly David Kamerschen is worthy of his Economics PhD. Would anyone like to carry out this arithmetic:
2 + 5 + 9 + 14 + 49 = ?
I’m no genius myself, but am I correct in thinking that the answer isn’t 80?
Oh, and why again is this remotely funny?
You’re write Anon, the joke would be so much better if he remember to put in all the decimals. To be correct it should be
1-4 drink free
5 pays 0.80
6 pays 2.40
7 pays 5.60
8 pays 9.60
9 pays 14.40
10 pays 47.20
It makes it flow so much better. And I do have a PhD. in economics!
Anon, it’s 79. With Monsier Ryan’s help, it would amount to 80$ =] no PHD here, i’m only 17. Basic mental math is fun, and nessicary for the Culinary arts.
nice thinking dad.
Sounds like Obama economics to me.
an invalid example, as taxes are not ‘purchased goods’ in any way, shape, or form…
Yea, Republicans and Tea Partiers just love to make jokes like this, but it is not reality.
Steve Jobs died last week. In one of his biographies I read that he was one of the richest men in the USA, but he received only $1 anually in salary since 1997. How? Because he received his compensation in Apple stock. After enough years passed he could sell it, and the taxes he paid were based at long-term capital gains rates which were a reduced rate.
So…even though he was a multi-billionaire, and my wife and I make less than $100,000 annually, I paid at a 28% tax rate and he paid at a 15% tax rate.
Wow some of you are idiots. The clear message at the end hate it or not is if you disturb the rich (ie. Provoke them by making there burden more than they feel they should burden) they won’t show up. They won’t create those jobs that pay you, they will move jobs overseas. What we all pay in taxes combined is barely ballpark if tripled to that of the top ten percent of the nation. So do not envy or despise them, aspire to be them. That means shift your paradigm. As a broke small business owner, speaking the truth.
James, thank you, thank you….you restore my faith, however reading most comments above destroy it.
How much Government do people want. Now answer Why?
That was funny. I do agree. Our government should not rely on the rich to make up the tax revenue lost in our recession. It does not work the way most of us like to think it does. Today, it is easier by way of electronic transfers for “the rich” to place their money beyond the reach of the tax collectors by just sending their millions or even billions of dollars overseas to tax friendlier foreign countries. They can also put their money into tax-exempt securities. In other words, taxing the rich can have the opposite effect. Politicians like to talk about the inequality and how they will raise the tax on the rich, but just like this article states, they’ll just “start drinking overseas where the atmosphere is somewhat friendlier”.
R J Lane fails to realize…without #10 1-9 have to pay more! or probably can’t afford what they have
Mad Zak Steve Jobs was working within the law! Elect someone who will change the law! Nancy Pilosi is a millionaire paying 14% or less on her investment income. Why don’t we hear about that?
Sorry i dunt get it. that made about as much sense to me like them math problems of then. “if suzy had 20 apples and traveled 50 blocks on the bus how many traffic lights were green when she forgot the peaches and what bus route was she on?”
Interesting story but here is what I don’t agree:
This story works only if the total is $100
The $20 discount should be spread depending on what they earn.
What I mean is in reality, it depends on how much the rich earns.
The rich should only get few % saving (I would even say no discount at all)instead of 16% because he really doesn’t need that much discount as he already earn way much more than he already can spend while other struggle to even survive on their daily life.
It’s true they might start drinking somewhere else overseas but as the government does nothing against them, they are free to do as they please because the government just follow them as good dogs.
Here is what really happened when I subscribed at Time Warner Cable:
They forced me to pay $70 deposit when I opened my account.
In the bill it was written something like $70 deposit(real)+$30 Monthly Fee&Charges(Example)=$100 Owe
After Paying my bill, my next payment was $30 Owe Previous Month+$70 Deposit+$30 Monthly Fee & Charges-$100 Payment=$30 Owe
And after that every month I receive $30 payment bills.
When I wanted to claim my $70 back, I had to call, go to the store, battle to claim it back and all of them, they said:
– $70? Usually we don’t charge $70 deposit but only $50… My guess is it’s just excuses
– The bill was many years ago and they have no trace in the system.
– Then they sent me my second bill highlighting that They have deducted my $70 deposit.
But I told them that it was with my $100 Money and then… Silence and they said we will talk to somebody and I never got news from them.
I’m pretty sure Time Warner Cable stole lots of money like that as nobody notice small details like that, and especially after few years…