The UK Tax System Explained In Beer - A Must Read In Laymens Terms!!!

Hey Everyone,

I got this email today that really simplified how the tax system in the UK works. It has always kind of confused me (if i'm honest) but this professor of economics shows you how it works by explaining it with the illustration of buying beer.

This also highlights how the government use the "Tax reduction benefits the poor, more than the wealthy" scam because most people don't actually realise how the system works.

If people actually knew, they would demand change. Maybe reading this email will help others realise that tax cuts don't benefit the poorer of us at all, it ONLY benefits the rich.

Spread it...

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 realised 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.

Xxxxx X. Xxxxxxxxxx, Ph.D. Professor of Economics.
For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible

That old chesnut,the rich will all move abroad unless we lower their taxes.david cameron would love you.sound like torie propaganda for the dumb.

And when the rich use their accountants and lawyers to only pay 1% tax, this little tax/beer comparison doesn't reflect real life and greed on the slightest.

I think everyone can understand the mathematics in this story, and I honestly believe that this is how most already understand taxes. Those who have given it any thought, anyway.

But I disagree with the philosophy - completely!
This little piece of propaganda, which it is, does not account for how the tenth man acquired his wealth, nor why he even bothers to pay the 59£ in the first place. Does he do this because he has a good heart, or because he knows life, his own included, is not sustainable if he doesn't?

I doubt that any Professor would ever write anything so utterly ignorant.

Originally posted by Mads1987
I think everyone can understand the mathematics in this story, and I honestly believe that this is how most already understand taxes. Those who have given it any thought, anyway.

But I disagree with the philosophy - completely!
This little piece of propaganda, which it is, does not account for how the tenth man acquired his wealth, nor why he even bothers to pay the 59£ in the first place. Does he do this because he has a good heart, or because he knows life, his own included, is not sustainable if he doesn't?

I doubt that any Professor would ever write anything so utterly ignorant.

edit on 06/06/12 by Mads1987 because:spelling

edit on 06/06/12 by Mads1987 because: (no reason given)

edit on 06/06/12 by Mads1987 because: (no reason given)

Well its funny that, the Professor who wrote it is supposedly this PERSON, yet it clearly says he didn't write it. Wonder why someone is using his name? Wonder if someone wanted to spread this in his name to discredit him in some way???? The plot thinkens

reply to post by jrmcleod


Please read the first lines of the biography:

Contrary to Internet folklore, Dr. Kamerschen is NOT the author of "Tax Cuts: A Simple Lesson in Economics" or “Bar Stool Economics” or anything similar to that. Additionally, he does NOT know who wrote it and he has no opinion on its merits.

reply to post by Mads1987


As Above!! (in my post above yours)

2nd

reply to post by jrmcleod


Oh well, I guess you just did.
But yeah - right of the bat, this story reminded me of the one about Einstein and a university professor who debates religion. That never took place either, but the way the story was conveyed was very similar to this one.

I have never been a big fan of quoting smart people cause it takes focus off the idea itself. But it is a classic propaganda move.

Here is a link for the einstein story - Einstein story debunked

But the higher paid folks pay more tax........

In fact low earners have got it good tax wise, unfortunately rent and other things one needs in life destroy any positive merits.

I thought this looked familiar!

Here's a response I posted "many moons ago" in response to a a striking similar "explanation" of the US tax system.

I'll bet the maths work out with similar results!

posted on 7-11-2008 @ 10:22 AM this post Oh, For The Love Of....!


This is the most shocking example of mathematical illiteracy I've seen in a very loooong time!

And I've dealt with A LOT of math Illiterates! (Most of them CPA's!)




Very well, School's in session. Pay attention.


10 people. Bar tab for beer= $100


If each paid an equal amount (Fair Share) towards the Tab, each would owe = $10

10 people X $10 = $100



However, per the provided example, 4 of those folks were required to pay nothing, therefore: 10-4= 6.

6 people were left to pay a $100 beer tab.


If each of the remaining 6 drinkers were to pay the same amount toward the bill, each would have owed aproximately $16.67

$100/6 = $16.666666666... (rounded off to : $16.67)



Now, instead of dividing up the bill equally amoung the remaining 6 drinkers, they decided to pay based on their percived ability to afford the expense. The named "Professor of Economics" thusly likens this method to the current income tax system.


Therefore the break down of the original $100 dollar tab looked like this:


Drinkers 1-4 pay - $0 or 0% of the tab
Drinker #5 pays - $1 or 1% of the tab
Drinker #6 pays - $3 or 3% of the tab
Drinker #7 pays - $7 or 7% of the tab
Drinker #8 pays - $12 or 12% of the tab
Drinker #9 pays - $18 or 18% of the tab
Drinker #10 pays - $59 or 59% of the tab

Total $100 or 100% of the tab



Got that?
Pay attention to the Percentages
paid by each of the drinkers. This is where the good Dr. Kemerschen "falls off the wagon"!


In the example, the barkeep, in a show of generosity, gives the drinkers a $20 "rebate". This effectively reduces the beer tab to $80 for the 10 drinkers.

$100 - $20 = $80


Of course, since 4 of those drinkers didn't pay anything in the first place, the remaining 6, paying customers are left to divey up the windfall.

If the drinkers would have stuck to their original plan, as they devised for apportioning the bill, the split would have been easy;


Each payor would have received a portion of the refund equivalent to the portion (percentage) of the bill he paid. Thus:


Drinkers 1-4 paid $0 get $0 back final amount paid = $00.00
Drinker #5 paid $1 gets $0.20 back, final amount paid = $00.80
Drinker #6 paid $3 gets $0.60 back, final amount paid = $ 2.40
Drinker #7 paid $7 gets $1.40 back, final amount paid = $ 5.60
Drinker #8 paid $12 gets $2.40 back, final amount paid = $ 9.60
Drinker #9 paid $18 gets $3.60 back, final amount paid = $14.40
Drinker #10 paid $59 gets $11.80 back, final amount paid = $47.20
Original Tab $100 minus $20/20% rebate = final tab $80.00




The good doctor tried to mislead us into believeing in the inequity of the tax system by erroneously attempting to equally divide the $20 refund offered amoung 6 recipients, when, in fact, those recipients, by virtue of the fact that they had not equally contributed to the expense (the original bar tab, or by analogy, the income tax) were not equally entitled the the same refund.


The tax system does not work that way.

Our tax system is geared such that the more you make, the more you (should) pay. And the more you have paid, the more you should get back, when it is due.


Ah well, I guess it is true;

PHD = Piled Higher, Deeper!


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