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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\u2026
\nThe 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.<\/p>\n
So, that\u2019s what they decided to do. The tenth man was outvoted!<\/p>\n
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.<\/p>\n
\u201cSince you are all such good customers,\u201d he said, \u201cI\u2019m going to reduce the cost of your daily beer by $20?. Drinks for the ten men would now cost just $80.<\/p>\n
The group still wanted to pay their bill the way we pay our taxes.<\/p>\n
So the first four men were unaffected. They would still drink for free.<\/p>\n
But what about the other six men ? How could they divide the $20 windfall so that everyone would get his fair share?<\/p>\n
They realized that $20 divided by six is $3.33. But if they subtracted that from everybody\u2019s share, then the fifth man and the sixth man would each end up being paid to drink his beer.<\/p>\n
So, the bar owner suggested that it would be fair to reduce each man\u2019s bill by a higher percentage the poorer he was, to follow the principle of the tax system they had been using, in other words they would receive a Tax deduction and he proceeded to work out the amounts he suggested that each should now pay.<\/p>\n
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).<\/p>\n
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.<\/p>\n
\u201cI only got a dollar out of the $20 saving,\u201d declared the sixth man. He pointed to the tenth man, \u201dbut he got $10!\u201d<\/p>\n
\u201cYeah, that\u2019s right,\u201d exclaimed the fifth man. \u201cI only saved a dollar too. It\u2019s unfair that he received ten times more benefit than me!\u201d<\/p>\n
\u201cThat\u2019s true!\u201d shouted the seventh man. \u201cWhy should he get $10 back, when I got only $2? The wealthy get all the breaks!\u201d<\/p>\n
\u201cWait a minute,\u201d yelled the first four men in unison, \u201cwe didn\u2019t get anything at all. This new tax system exploits the poor!\u201d<\/p>\n
The nine men surrounded the tenth and beat him up.<\/p>\n
The next night the tenth man didn\u2019t show up for drinks so the nine sat down and had their beers without him.<\/p>\n
But when it came time to pay the bill, they discovered something important.<\/p>\n
They didn\u2019t have enough money between all of them for even half of the bill!<\/p>\n
And that, boys and girls, journalists and government ministers, is how our tax system works.<\/p>\n
The people who already pay the highest taxes will naturally get the most benefit from a tax reduction.<\/p>\n
Tax them too much, attack them for being wealthy, and they just may not show up anymore.<\/p>\n
In fact, they might start drinking overseas, where the atmosphere is somewhat friendlier.<\/p>\n
David R. Kamerschen, Ph.D. \u2013 Professor of Economics.<\/p>\n","protected":false},"excerpt":{"rendered":"
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\u2026 The first four men (the poorest) would pay nothing,. The fifth would pay $1. The sixth would pay $3. The … <\/p>\n