# Thread: Tax the system explained in beer

1. ## Tax the system explained in beer

THE TAX SYSTEM EXPLAINED IN BEER*

Suppose that once a week, 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.
And the tenth man (the richest) would pay £59.*
So, that's what they decided to do.
*
The ten men drank in the bar every week and seemed quite happy with the arrangement until, one day, the owner caused them a little problem. "Since you are all such good customers," he said, "I'm going to reduce the cost of your weekly 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? 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 not only would the first four men still be drinking for free but the fifth**and sixth man would each end up being paid to drink his beer.
So, the bar owner suggested that it would be fairer to reduce each man's bill by a higher percentage. They decided 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 (a 100% saving).
The sixth man now paid £2 instead of £3 (a 33% saving).
The seventh man now paid £5 instead of £7 (a 28% saving).
The eighth man now paid £9 instead of £12 (a 25% saving).
The ninth man now paid £14 instead of £18 (a 22% saving).
And the tenth man now paid £49 instead of £59 (a 16% saving).*
Each of the last six was better off than before with the first four continuing to drink for free.
*
But, once outside the bar, the men began to compare their savings. "I only got £1 out of the £20 saving," declared the sixth man. He pointed to the tenth man, "but he got £10"
"Yes, that's right," exclaimed the fifth man. "I only saved*£1 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 only got £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*week 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 to pay 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 might 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.
For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible
*

2. awsome.

3. Very good. Never really understood why a higher rate of tax means that people pay 'their fair share'.

4. Excellent!
Should be taught in schools

5. Could you ensure Mr Milliband and his mates get a copy

John

6. Must be true 'cos I got it off of the internet...

http://www.snopes.com/business/taxes/howtaxes.asp

7. First of all John you have got to teach Mr. Milliband how to read,
then to understand what he has read,
use the information for the good of the country,
and not how good he might or might not look

8. Publican dropped the price of his beer by 20%........... ???

Oh yeah, Wilson did that with beer back in 1967.... And tried to tell us beer was not worth any less than before. It didn't go very well.

9. Very effective illustration, but I think the following might more accurately reflect the current situation:

1. The 10 friends set up a tab with the pub landlord, saying they'd pay him at the end of each month.

2. They then agreed to put the estimated cost of each week's round into a kitty (in the proportions described above).

3. They entrusted the richest with the kitty, because he promised to do something terribly clever with it. He swore that, come the end of the month, not only would they have enough to pay the landlord, but everyone would have a little extra to rake home.

4. He bet it on the ponies and lost.

5. To cover the loss, he borrowed money from a shady friend.

6. He bet this as well, and lost.

7. Come the end of the month, the group now owed both the landlord and the rich man's shady friend.

8. The rich man explained to them that the only way to solve the problem was if they all dug into thier pockets to pay off the shady friend before he sent round the goons. But they had to do it it through him because the shady friend would only deal direct with him. And if they refused, the rich man would just skip the country and the shady friend would send round the goons...

10. + one mungo.
News at ten didnt put it quite like that though.
Sinbad

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