The U.S tax system explained in beer

I recieved this in an email this morning, and I thought that maybe some people could benefit from this explanation, as the basics mechanics of our tax system seem to be lost on some and mis represented by others.

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 pay $ 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 t he 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.

Moral: Do not debate taxes when drunk.

Not too outrageous as it sounds, because we live in a "Me" society. It's kind of hard not to be of that mentally when everyone is pressured to buy and consume.

I can't believe I'm the first to say in response to this....

mmmmmmmmmmmmm......beer.

Seriously though - good write up, humorous and it does make a point.

Yes, but what they are not telling you is that probably the richest man there drinking secretly owns the brewery so all the profit, even from the money he spends, goes right back into his pocket.

Originally posted by Cherryontop
Yes, but what they are not telling you is that in fact, the richest man there drinking secretly owns the brewery so all the profit, even from the money he spends, goes right back into his pocket.

good point.

the government should seize control of beer production.

this will cause the price of beer to go down, like it has for every other enterprise government has controlled throughout the entire history of the world.

This post would be more interesting if you used a marijuana analogy. Bring in lawmakers, drug dealers, and a bunch of stoners who don't give a rat's ass. Now that would be a more accurate portrayal.

How incredibly obtuse, I don't believe a professor actually wrote that.

So...what exactly does the beer represent in this story?

What the story doesn't tell you however, is that the tenth man hires mostly illegal labor to skirt payroll taxes and has a tax shelter set up in Switzerland that allows 60% of his income from being brought to light. He also bribed a state official to prolong inspection on his run-down lumber mill that has been dumping droves of waste water into a stream that runs to several nearby communities--causing damage to natural habitats and health problems with the locals.

And guess what? He did leave, he left because he couldn't keep the sham up long enough and would eventually have to pay for his toxic dumping. He left because he couldn't keep making a TON OF MONEY by evading regulations without it catching up with him--so he left. He left behind a mere husk of town in a wake of destruction.

Not saying I don't agree/disagree with the original post, this is just another point of view.

Funny thing is, MY story is based on actual events.

The opening post, however, is a fraud...a forgery.

It wasn't written by David R. Kamerschen.

reply to post by Tharsis


I think the story is obtuse as well.

Government uses guns to take peoples money, not fists.

reply to post by mnemeth1


Beer would actually become more expensive to the end user, and it would taste like GMO barley.

For what its worth - I tried looking for the guy given at the bottom of the OP as the one who wrote it and found this instead.

Snopes - How Taxes Work

It turns out he didn't write it, but nobody is sure exactly who did write it. There have been several claimed authors but all have denied it. Its been floating around in one form or another since 2001. Still entertaining though.

Good post, except you forgot one thing.

the loophole.

If even one of the men doesn't drink the entire beer, the 10th man writes it off, so he never drinks his whole beer, and since one of the first guy doesn't drink beer, yet they bought it for him anyways, he get's to write that off too, but since he pays the most money, the bartender only let's him write it off.

Oh and the tenth man, buys a portion of the bar, so soon really doesn't have to pay anything, since he owns it in the first place.

which is exactly why the rich have to stop transfering their monies over seas into subsidiaries to get a tax break, it destroys the rest of the economy. plus, I only drink whiskey.

Originally posted by lostviking
reply to post by mnemeth1

 

Beer would actually become more expensive to the end user, and it would taste like GMO barley.

nonsense, government only produces high quality products at non-for-profit prices.

In fact, since government can set prices, they could produce beer and then give it away for nothing.

I personally think government should take control of all industry and give all the products away for nothing.

Well see the point is not how the rich man got his money, or how he keeps his money. The point is it is his money, regardless of how aquired and how is it fair that the people who did not pay for the beers they consumed to complain that the man who paid most of the bill got a little more cash back, allthough his discount percentage was lowest.

Originally posted by SM2
Well see the point is not how the rich man got his money, or how he keeps his money. The point is it is his money, regardless of how aquired and how is it fair that the people who did not pay for the beers they consumed to complain that the man who paid most of the bill got a little more cash back, allthough his discount percentage was lowest.

Yeah, the point seems to be lost on people that the guy probably got rich by actually producing stuff people wanted at a price they were willing to pay for.

I say probably, because many of the ultra-rich today make their money through government contracts, subsidies, bailouts, favorable regulations, restrictions on competition, and government debt financed spending. - THOSE people should not only be taxed, but their existing wealth should be confiscated from them.

The CEOs of Raytheon, General Electric, Goldman Sachs, and Bank of America for instance should all be stripped of their wealth since it was acquired through the violent theft of the public by government.

Originally posted by SM2
Well see the point is not how the rich man got his money, or how he keeps his money. The point is it is his money, regardless of how aquired and how is it fair that the people who did not pay for the beers they consumed to complain that the man who paid most of the bill got a little more cash back, allthough his discount percentage was lowest.

what is this? clifnotes? i got the OP. it ended saying without the riches taxes, the rest cant afford to sustain. thus solidifying my previous post. the country is going down the porcelain god because the rich take their money overseas to save their percentage, and the bar tender, aka government, keeps increasing its costs and asking for more money.

reply to post by SM2


Makes sense that way... except the 9 other men all work for the 10th man, and the money he is spending to pay for his larger share comes from the hard work of the other 9 men

Originally posted by Kharron
reply to post by SM2

 

Makes sense that way... except the 9 other men all work for the 10th man, and the money he is spending to pay for his larger share comes from the hard work of the other 9 men

The 10th man is actually the Fed chairman.

We all work for him.

So now we're justifying trickle down economics with a bar anecdote?

In what world do rich guys and poor guys regularly drink together and share anything?

The rich guy actually drinks Chardonnay either @ home or a restaurant, and the first four guys can't possible be at the bar because they're forced to work a second job to pay their rent/mortgage.

??? Where in that story is the truth about the rich guy using the 10 dollars to buy a 30 Indian men a beer in Bombay?

Wish I had a deal like that with my buddies @ the local Gin mill.

Half of the taxpayers would be employed by the government, so the other half is paying ALL of the taxes since the pub pays none...except the usual bribes to the mafia that protects it from competition.