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The Tax System Explained in Beer

Rhapsody1447

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http://www.ijreview.com/2012/04/688-tax-system-explained-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 h 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.
 
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NAKED N00B

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Awful post.

It deals with a nonissue. If we, as a country, are going to grant everyone a tax break then I don't know how many people would argue with the idea of the wealthy getting the largest nominal breaks is fair. I'm sure there are nutjobs out there who would rail against it, but that's not a major complaint of any sensible individual. The real issue is over how much the total bill is. We're not in a position to cut taxes, so that's a moot point.

If your argument is that we're scaring off the people buying a lot of the beer by asking them to pay the same rate they did in the 90s, then you're going to need more evidence than a Libertarian's rewriting of Cheers.
 

Rhapsody1447

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Awful post.

It deals with a nonissue. If we, as a country, are going to grant everyone a tax break then I don't know how many people would argue with the idea of the wealthy getting the largest nominal breaks is fair. I'm sure there are nutjobs out there who would rail against it, but that's not a major complaint of any sensible individual. The real issue is over how much the total bill is. We're not in a position to cut taxes, so that's a moot point.

If your argument is that we're scaring off the people buying a lot of the beer by asking them to pay the same rate they did in the 90s, then you're going to need more evidence than a Libertarian's rewriting of Cheers.

The argument comes from the fallacy of comparing nominal dollar amounts when dealing with changes in tax rates. The analogy uses progressive rate cuts and shows the foolishness of claiming the cuts are regressive simply because the nominal dollar amount is higher for the wealthy. It's simply mathematically impossible to cut taxes across the board without the wealthy getting the largest nominal break. I'm sure you would remain ideologically consistent when discussing tax increases so there is no sense in presenting that comparison.
 

Harshaw

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I don't know how many people would argue with the idea of the wealthy getting the largest nominal breaks is fair. I'm sure there are nutjobs out there who would rail against it, but that's not a major complaint of any sensible individual.

Were you paying the slightest bit of attention at the time of the Bush tax cuts? I guess you think guys like Tom Daschle, Richard Gephardt, Chris Dodd, Charles Schumer, etc., etc. are "nutjobs"?

I guess you missed Daschle's little stunt where he presented a Lexus as the tax cut the "wealthy" get, while a muffler to go on a "used car" was the tax cut the "poor" get.
 

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The argument comes from the fallacy of comparing nominal dollar amounts when dealing with changes in tax rates. The analogy uses progressive rate cuts and shows the foolishness of claiming the cuts are regressive simply because the nominal dollar amount is higher for the wealthy. It's simply mathematically impossible to cut taxes across the board without the wealthy getting the largest nominal break. I'm sure you would remain ideologically consistent when discussing tax increases so there is no sense in presenting that comparison.

But since we're not in a position to cut taxes at the federal level, we should be talking about increases. That means we should be talking about progressive increases. Raising taxes in the current economic climate is clearly a bad idea, but I think tying progressive increases to some sort of measure of economic growth, whether it be GDP or unemployment or something else, would be wise.

Now if there ever comes a point when cutting taxes is appropriate, I would support this argument. But we're not living in this situation so I think a thread dedicated to it is a distraction from real problems.

Were you paying the slightest bit of attention at the time of the Bush tax cuts? I guess you think guys like Tom Daschle, Richard Gephardt, Chris Dodd, Charles Schumer, etc., etc. are "nutjobs"?

I guess you missed Daschle's little stunt where he presented a Lexus as the tax cut the "wealthy" get, while a muffler to go on a "used car" was the tax cut the "poor" get.

Some of the nuttiest nut jobs are employed on Capitol Hill. Anyone who makes a point based on flawed logic and cheap gimmicks is a nut job.
 

Rhapsody1447

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Now if there ever comes a point when cutting taxes is appropriate, I would support this argument. But we're not living in this situation so I think a thread dedicated to it is a distraction from real problems.

Take a deep breath. The analogy is meant to refute a common misperception, the thread is located in the partisan politics forum and in no way advocates for a change in policy.
 

RadicalModerate

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Yup, the rich pay more because our capitalist system has given them more, assuming they didn't inherit it all or make the money illegally/immorally. Sorry, I don't feel too bad for the guy making $10 million dollars having to fork over 3 or 4 million of it to pay for things. What things that pays for it a perfectly reasonable debate and we waste a lot of money on unnecessary crap. But you act like life is difficult at a mere $6.5 million a year. It ain't.
 

Your Star

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Yes, the poor rich, I feel so bad for them. I have to beat them away everyday from trying to barge into my house, and trade places with me. Very very sad.
 

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Awful post.

It deals with a nonissue. If we, as a country, are going to grant everyone a tax break then I don't know how many people would argue with the idea of the wealthy getting the largest nominal breaks is fair. I'm sure there are nutjobs out there who would rail against it, but that's not a major complaint of any sensible individual. The real issue is over how much the total bill is. We're not in a position to cut taxes, so that's a moot point.

If your argument is that we're scaring off the people buying a lot of the beer by asking them to pay the same rate they did in the 90s, then you're going to need more evidence than a Libertarian's rewriting of Cheers.

It also doesn't even mention issues like lobbyists or government contracts.

"Mr. Bartender, I'm paying the most for the beer here because I can afford it better than my friends. But if you give me some free beer, I'll invite more friends to this particular bar than to other bars, and what you'll earn off them, even if they pay less, would be more than the free beers you give to me."
 

xpiher

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I've never herd this supposed "liberal" argument made in the story before. I've herd far more complaining about how all income isn't treated the same. If you are a libertarian you should be for a fair tax code were all income is taxed in the same manner regardless of the source

The difference between a democrat and a republican is who owes the favor, the politican or the business
 

mpg

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I've never herd this supposed "liberal" argument made in the story before.
I hear it all the time. I heard it as a criticism of the Reagan tax cuts. I heard it in 2000 when candidate GWB was running for president. I heard it in 2001 when the tax cuts went into effect, and I hear it now when people criticize the Bush tax cuts.
 
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mpg

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We seem to have a reverse straw man on our hands.
 

a351

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Awful post.

It deals with a nonissue. If we, as a country, are going to grant everyone a tax break then I don't know how many people would argue with the idea of the wealthy getting the largest nominal breaks is fair. I'm sure there are nutjobs out there who would rail against it, but that's not a major complaint of any sensible individual. The real issue is over how much the total bill is. We're not in a position to cut taxes, so that's a moot point.

If your argument is that we're scaring off the people buying a lot of the beer by asking them to pay the same rate they did in the 90s, then you're going to need more evidence than a Libertarian's rewriting of Cheers.
I agree that we're not in a position to cut taxes across the board, but seeing as companies have been outsourcing jobs and manufacturing even with relatively friendly rates (save for the corporate rate), do you really think that a rate hike in this economic climate would encourage companies and/or individuals to invest here and not elsewhere? I'd say it's more along the lines of an educated guess, not a baseless assertion.
 
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ARealConservative

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Awful post.

It deals with a nonissue. If we, as a country, are going to grant everyone a tax break then I don't know how many people would argue with the idea of the wealthy getting the largest nominal breaks is fair. I'm sure there are nutjobs out there who would rail against it, but that's not a major complaint of any sensible individual. The real issue is over how much the total bill is. We're not in a position to cut taxes, so that's a moot point.

If your argument is that we're scaring off the people buying a lot of the beer by asking them to pay the same rate they did in the 90s, then you're going to need more evidence than a Libertarian's rewriting of Cheers.

the crying over the Bush tax cuts is exactly this scenario. Everyone that paid taxes (beer) received a cut, but the wealthier you were, the larger the cut.
 

xpiher

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I hear it all the time. I heard it as a criticism of the Reagan tax cuts. I heard it in 2000 when candidate GWB was running for president. I heard it in 2001 when the tax cuts went into effect, and I hear it now when people criticize the Bush tax cuts.

No the argument over the bush tax cuts us that "we can't afford to give it to everyone anymore"

The difference between a democrat and a republican is who owes the favor, the politican or the business
 

ARealConservative

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No the argument over the bush tax cuts us that "we can't afford to give it to everyone anymore"

liberals dubbed them as "tax cuts for the rich" because the majority of cuts went to the wealthy, just as outlined in this parable.

sure, some, such as me pointed out the ridiculousness of claiming the Clinton surplus even existed in the first place, but since the media didn't call out the liberals for claiming a bogus surplus, they couldn't all of a sudden realize the surplus was a fraud when Bush got elected offering to return it to the people.
 
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The logical missteps here (and in much of conservative talk about taxation) are (1) the assumption that the wealth of all men are mutually independent, (2) the assumption that both poor and rich mean make equal use of public resources, (3) the assumption that by paying low taxes the poor men are the only one getting a good deal. None of this, of course, is true.

1. The rich men have become rich in part because they have talent, but also because they had access to the poor men’s labor and the middle class’ purchasing power. Likewise the poor men and middle class are poorer than the rich men because the latter tightly control their market value with economic and political means, as a mean to increase profits on their activities.

2. The rich men, by definition, make more use of public resources. Their activities require more land, more energy, more natural resources, more public infrastructure. They monopolize more government workers, require more military resources, and generate more environmental damages and so forth.

3. The poor men don’t pay taxes because they are dirt poor. All of their disposable income go towards getting a roof and feeding their family an dealing with the stress of being poor. Were they to pay more paxes they would become a burden for society which would be good for no one.

The taxation system that you are ranting against is used widely throughout the world and is built to mitigate the negative effect of factors 1, 2 and 3 on society. It has been the source of political and economic stability for decades, and has allowed the poor to survive, the middle class to thrive, and the rich to get richer.

So my point is be really careful about what you wish for because you might get it.


Thought I would add a, what I think, decent rebuttle: (Comment from this website)

The Obama Tax System Explained In Beer | Fortune Watch

(First Comment)
 

xpiher

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liberals dubbed them as "tax cuts for the rich" because the majority of cuts went to the wealthy, just as outlined in this parable.

sure, some, such as me pointed out the ridiculousness of claiming the Clinton surplus even existed in the first place, but since the media didn't call out the liberals for claiming a bogus surplus, they couldn't all of a sudden realize the surplus was a fraud when Bush got elected offering to return it to the people.


In other words you dont want the gov to pay off its debt
The difference between a democrat and a republican is who owes the favor, the politican or the business
 

ARealConservative

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In other words you dont want the gov to pay off its debt
The difference between a democrat and a republican is who owes the favor, the politican or the business

nice dodge.

the parable is a good representation of the left calling tax cuts for everyone that pays income taxes, "tax cuts for the rich", as recently happened.
 

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nice dodge.

the parable is a good representation of the left calling tax cuts for everyone that pays income taxes, "tax cuts for the rich", as recently happened.

Right you are, he was pointing out though that tax "tax cuts for the rich" is hidden behind the veil that if they only "cut taxes for the rich" then conservatives would finally see it. The veil is that if we cut taxes for everyone then they won't see it that way. Then again, difference in philosophy, I'm not understanding how a Libertarian trusts politicians though.
Also you will add that this didn't happen, but when you do I would like to see your evidence. (I'll freely admit here that I have no evidence that this DID happen but this does add doubt, reasonable doubt I would think)
(Sorry for taking your response xipher)
 
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Thought I would add a, what I think, decent rebuttle: (Comment from this website)

The Obama Tax System Explained In Beer | Fortune Watch

(First Comment)

So what in that first comment applies to the college grad that pays his/her way through school, graduates top of his/her class Harvard pediatrics and is now bringing in 300k while being taxes close to 50% while still paying off school loans? What crazy resources or poor people did they use to get to their goal. Same goes for the Phd CIS or one of any number of degrees. What have they done to owe so many so much with so much hate thrown at them for being RICH.
 

Jryan

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So what in that first comment applies to the college grad that pays his/her way through school, graduates top of his/her class Harvard pediatrics and is now bringing in 300k while being taxes close to 50% while still paying off school loans? What crazy resources or poor people did they use to get to their goal. Same goes for the Phd CIS or one of any number of degrees. What have they done to owe so many so much with so much hate thrown at them for being RICH.

You HONESTLY think that they are rich because of hard work? This implys that EVERYONE AND ANYONE who works hard is rich.... Them being rich has nothing to do with luck? This implys that everything they work for is merely because they are a hard worker. Example would be that they willed themselves not to have clubbed feet or ADD or ADHD or Autism... You think everyone and I mean EVERYONE can achieve their goals? Point has been made I hope. So how is it fair, and I want you to grasp all three questions into this one, for someone to not be able to even afford a to live while they have a beautiful life with such a great wife while they live, merely, next door to someone who can barely afford the food on their table?
 

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nice dodge.

the parable is a good representation of the left calling tax cuts for everyone that pays income taxes, "tax cuts for the rich", as recently happened.

What dodge? you're response seemed to indicate that wherever there is a surpluse it should be automatically reimbursed to the tax payers. The result of which would be the gov never paying down its debts in a timely manner.

edit I'd also like to point out that dems don't have a problem with most of the bush tax cuts, just those affecting the top 10%.
 
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