The U.S tax system explained in beer

It amuses me to see the amount of incompetence in this thread. Everyone likes to get stuck up on little details involving the wealthy, and forget the detractors of the less-than-wealthy (such as waiting around for the government check).

"The wealthy send money overseas!"

Irrelevant to the example. The fact is that nearly 60% of income tax revenue comes from the top 10%. That's after deductions, loopholes, etc.

In either case - while they often invest in and subsidize in foreign industry - that does generate customers overseas for our higher-tech and quality goods. This is absolutely essential to trade on a level playing field with other nations. Otherwise, you end up with situations like China - where they produce 80% of the nonsense on the shelf and refuse to purchase higher-tech goods and services from America (this has changed, somewhat, as their practices have migrated away from centralized government control). In places like Korea, however, we see a very good example of an equal-playing-field economic partner. Not only do they purchase from markets we specialize in - they have a number of Americans actively working in their country - quite a few, I might add.

There is nothing wrong with international business - unless you don't understand that wealth is equivalent to productivity. Helping to make other countries productive ultimately helps us to become more productive, as well.

"The wealthy man owns the bar!"

If you own a lemonade stand, and drink a pitcher of your own lemonade, are you not out the cost of that lemonade? Would sharing some with your friends, and agreeing to split the cost with them in the manner described above, not end up costing you?

"The wealthy man profits off of the hard work of the other 9"

The relationship is mutual. The wealthy man became wealthy because he had a productive idea, and expanded it such that society values his contribution in the form of capital return. In order to accomplish this, the work of other classes is necessary, and they are compensated according to the rarity and proficiency of their skills, the time given, and other concepts within corporate policy. If the wealthy man did not offer conditions of capital compensation to the liking of those employed - then they would not have agreed to work for him.

And in reality - the first two or three don't work at all. They simply sit around and wait for the government check in the mail.

"We don't get enough money!"

You do realize that the tax system we have transfers approximately 1,000,000,000,000 (One -Trillion-) dollars from the top 40% of tax payers to the lower 60% of tax payers through direct and indirect benefits. Every year.

Considering we only have a population of about 300,000,000 - 60% of that is roughly 200,000,000 (that's closer to 66% - but, whatever) - that's a 5,000 per-capita subsidy each year. That's grossly oversimplifying it - most of that goes to the lowest 20% - but you get the idea.

My question is... why is the government spending so much to begin with?

i got a solution, don't invite the freeloaders to drink beer, that's min. 4 extra beers for the remaining 5.

second, no one made an extra ten, they all saved money so they should be happy and drink more beer. that would be a normal persons reaction.

Originally posted by SM2

David R. Kamerschen, Ph.D.

Professor of Economics

University of Georgia

This guy teaches economics?

He got it wrong.

Not only do the 1st 4 drink for free but the bartender gives them each a couple of beers to take home with them.

And he forgot about the sales tax and license fees on the transaction.

He also forgot to mention that the brewery creates beer out of thin air and pays it's suppliers with IOU's, which they gladly accept because they drink for free as well.

What this analogy doesn't tell you is that as the amount that each person pays goes up, he also consumes more and more of the beer. So, the guys who pay nothing consume maybe one or two beers; the guys who pay the most consume a couple of six-packs worth.

What the analogy also doesn't tell you is that the guy who pays the most has a helpmate that he bribes for a couple of bucks a night, who then finds loopholes in the pricing, and so the guy whose supposed to be paying the most ($49) actually only winds up paying about as much as the guy who pays second most ($18). And then people wonder why the bar is constantly on the verge of closing and having to borrow money.

reply to post by gnosticquasar

What this analogy doesn't tell you is that as the amount that each person pays goes up, he also consumes more and more of the beer. So, the guys who pay nothing consume maybe one or two beers; the guys who pay the most consume a couple of six-packs worth.

Except it does provide that each drink the same number, thereby invalidating this comment.

You are correct, the example is relatively inaccurate: www.taxfoundation.org...

Figure 5 presents the share of government spending received by each income quintile.
Households in the two lowest income quintiles receive the largest shares of total
government spending, together accounting for 51.4 percent of total spending. This result
is largely driven by spending on government transfer payments to elderly households—
many of whom reside in the lower income quintiles—and other government aid to lowincome
households. Households in the fourth quintile receive the smallest share of total
government spending, at 14.8 percent.

So, it's more like the poorest four guys drink half of the beer.

"But the wealthy have a bunch of stuff."

Yes, and they pay for it by their own dollar, outside of taxes, and thereby all of those transactions exist outside of the example. This is a comparison of tax burden versus tax benefit.

What the analogy also doesn't tell you is that the guy who pays the most has a helpmate that he bribes for a couple of bucks a night, who then finds loopholes in the pricing, and so the guy whose supposed to be paying the most ($49) actually only winds up paying about as much as the guy who pays second most ($18). And then people wonder why the bar is constantly on the verge of closing and having to borrow money.

Whether this is the case or not - the figures reported are the actual government revenue broken down by tax brackets. It is not "what they are supposed to pay." It is what they actually pay.

Perhaps we should change the setting to a fishery, instead... there's more red-herrings around here than bar hoppers.

reply to post by Aim64C


Wealthier people generally consume more of the nation's resources. Maybe because of this, they should contribute more to the nation; one of the prime ways this is done is by taxes.

People in the top tax bracket would be paying the bulk of the taxes whether we have a flat tax or a progressive tax simply because they make several times (several hundred times in some cases) what your average Joe does. When somebody's making 500k a year, they're going to pay more in absolute terms than somebody who makes 20k. It's really just basic math that the rich wind up contributing most of the tax dollars. Using that fact to bemoan U.S. tax policies or start warning people that maybe they'll just get sick of it is just lol.

reply to post by gnosticquasar

Wealthier people generally consume more of the nation's resources. Maybe because of this, they should contribute more to the nation; one of the prime ways this is done is by taxes.

I don't think you've quite thought this through.

Through this process, resources are acquired via a system of exchange so as to be consumed.

[Jeopardy Music Intermission]

The question should be: "What is purchasing?"

You'll take Industry for 300?

Skilled laborers and supervisors.

"What is the Middle Class."

[Everyone claps]

Consumption of goods and resources has already been compensated for through the price for that product. Taxes, in no way, shape, or form, are intended to address the issue of "they consume more resources." Taxes are a means for the government to acquire the funding necessary to conduct its operation. Wealth is created in the middle class and compensated with capital return from those who purchase goods and services made by the middle class - namely, the wealthy.

People in the top tax bracket would be paying the bulk of the taxes whether we have a flat tax or a progressive tax simply because they make several times (several hundred times in some cases) what your average Joe does.

Except we have a quite progressive tax system.

When somebody's making 500k a year, they're going to pay more in absolute terms than somebody who makes 20k. It's really just basic math that the rich wind up contributing most of the tax dollars. Using that fact to bemoan U.S. tax policies or start warning people that maybe they'll just get sick of it is just lol.

In all honesty - if I had the money, I'd not start a business here. The climate is turning into such that the wealthy are begrudged and targeted with violence. It's safer, cheaper, and more hospitable in other nations. I'd be looking at starting up a defense contractor, anyway - and Russia's much more respectful of the competitive nature of that market.

In either case - progressive taxes and benefit programs don't really work. The system has been transferring about one trillion dollars annually since 1994 from the top 40% to the lower 60% - with the majority going to the lowest 40%.

This concept of redistributing wealth just doesn't work. It never has. This is why the eastern nations curbed their heavily progressive taxes and saw some of the biggest economic gains on record. It also doesn't help that we are continually spending into a deficit over these social programs.

here here! Now let's all have a beer on the rich guy! anyone.......anyone......

reply to post by SM2


You're missing part of the story. You see, because they were drinking buddies the rich man wanted to help the poor men. So he decided to give them some advice on finances. "You have to learn how to leverage your money! Look at me. I've cornered the widget business, I can charge anything I want for widgets!"

But 3 of the 4 poor men were working in the rich man's factories for minimum wage, and they answered "But we have no money to leverage. We spend all of our money on food!"

"That's your problem then," concluded the rich man "I only spend 1% of my income on food."