Why "Soaking the Rich" in taxes does not work - explained with BEER!

[ScreamingEagle]

THE TAX SYSTEM EXPLAINED IN 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 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.

David R. Kamerschen, Ph.D.
Professor of Economics.

Lost Napkins: Why "Soaking the Rich" in taxes does not work - explained with BEER!

 

[DontBeStupid]

I was promised there'd be beer.

 

[Dr.Drock]

Soaking anyone in taxes doesn't work, economics 101.


All taxes are a burden to the economy, we just gotta ask ourselves how much of a burden we're willing to put on it. I want the smallest burden possible for all.

 

[Ravi]

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

No one pays 59% tax on income.

 

[CrusaderFrank]

THE TAX SYSTEM EXPLAINED IN 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 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.

David R. Kamerschen, Ph.D.
Professor of Economics.

Lost Napkins: Why "Soaking the Rich" in taxes does not work - explained with BEER!

10 minute standing ovation!!! That's Perfect!!

 

[kwc57]

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

No one pays 59% tax on income.

Not yet..........unless your ilk gets their way.

 

[Ravi]

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

No one pays 59% tax on income.

Not yet..........unless your ilk gets their way.

My "ilk" probably pays more in taxes a year than you earn in two, little man.

But of course I am not surprised at all that you would give credence to a false analogy, being the hack that you are.

 

[DontBeStupid]

And that, boys and girls, journalists and government ministers, is how our tax system works.

Well, except for the fact that the 10th guy is also the bar owner.

But other than that, cute story.

 

[ScreamingEagle]

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

No one pays 59% tax on income.

We're getting damn close...

Total tax percentage paid by the above average US citizen, 2009 est. - 57.7%


Federal personal income tax 17%
(2011 est. - 18.2%) Top 25% rate. It ranges from a credit up to well over 40%. Source

State & local income taxes 10.1%
(2009 - 10.6%) State taxes range from under 6% to over 12%. Local taxes run from zero to 2.75%. Source, source, source, 2009 source

Sales tax 9.7%
(2009 - 10.3%) Figure is the average rate. State sales taxes range up to 8% and local taxes run from zero to over 5%. Source, source, source, 2008 source, 2009 source

Social security & Medicaid 7.65% Total rate is actually 15.3% since half is paid by the employer, but we're ignoring that to be kind. Source, box 1

Federal corporate income tax share 3% Based on corporate taxes being approximately 1/6 of personal taxes, and that they are paid by individuals in the final analysis. Source

Property tax 2.5%
(2007 - 2.7%) Yearly average actual costs range from under $200 in Alaska to almost $1900 in New Jersey. Source

Fuel/gasoline tax .5%
(2009 est. - .6%) Approximately 23% of the 2005 gasoline price is for federal & state taxes. The federal excise tax is 18.4 cents per gallon. Per the CPI, about 6% of the average budget is for transportation. Estimated. 2010 estimate, $.45 per gallon average. Source

Other 5%
(2009 est. - 7%) Includes estate tax, fees, licenses, inflation losses, inheritance, deficit allowance, gift, and others too numerous to mention. Estimated.


How much tax do we really pay?

 

[Ravi]

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

No one pays 59% tax on income.

We're getting damn close...

Total tax percentage paid by the above average US citizen, 2009 est. - 57.7%


Federal personal income tax 17%
(2011 est. - 18.2%) Top 25% rate. It ranges from a credit up to well over 40%. Source

State & local income taxes 10.1%
(2009 - 10.6%) State taxes range from under 6% to over 12%. Local taxes run from zero to 2.75%. Source, source, source, 2009 source

Sales tax 9.7%
(2009 - 10.3%) Figure is the average rate. State sales taxes range up to 8% and local taxes run from zero to over 5%. Source, source, source, 2008 source, 2009 source

Social security & Medicaid 7.65% Total rate is actually 15.3% since half is paid by the employer, but we're ignoring that to be kind. Source, box 1

Federal corporate income tax share 3% Based on corporate taxes being approximately 1/6 of personal taxes, and that they are paid by individuals in the final analysis. Source

Property tax 2.5%
(2007 - 2.7%) Yearly average actual costs range from under $200 in Alaska to almost $1900 in New Jersey. Source

Fuel/gasoline tax .5%
(2009 est. - .6%) Approximately 23% of the 2005 gasoline price is for federal & state taxes. The federal excise tax is 18.4 cents per gallon. Per the CPI, about 6% of the average budget is for transportation. Estimated. 2010 estimate, $.45 per gallon average. Source

Other 5%
(2009 est. - 7%) Includes estate tax, fees, licenses, inflation losses, inheritance, deficit allowance, gift, and others too numerous to mention. Estimated.


How much tax do we really pay?

The only "progressive" system is income tax. So you're either not bright enough to understand how the progressive system works or you're just a troll spreading false information.

 

[DontBeStupid]

Sales tax 9.7%
(2009 - 10.3%) Figure is the average rate. State sales taxes range up to 8% and local taxes run from zero to over 5%.

Are you honestly suggesting that the wealthy spend all their disposable income?

 

[Dr.Drock]

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...





No one pays 59% tax on income.

Not yet..........unless your ilk gets their way.

My "ilk" probably pays more in taxes a year than you earn in two, little man.

But of course I am not surprised at all that you would give credence to a false analogy, being the hack that you are.

You know it seems everyone on a message board is rich, so how come when I signed up for this one my bank account didn't have a few more zeros added to it?


I'VE BEEN CHEATED!!!!!!!!!!!!!!!!!!!!!!!!

 

[Wiseacre]

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

No one pays 59% tax on income.

I thought he was talking about the percentage of the total federal taxes paid; I wouldn't be surprised if the top 10% are paying at least 60% of the tax revenues.

 

[Ravi]

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

No one pays 59% tax on income.

I thought he was talking about the percentage of the total federal taxes paid; I wouldn't be surprised if the top 10% are paying at least 60% of the tax revenues.

Doubtful.

If he were talking about the total federal taxes paid there would not be four men that paid nothing.

 

[kwc57]

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...





No one pays 59% tax on income.

Not yet..........unless your ilk gets their way.

My "ilk" probably pays more in taxes a year than you earn in two, little man.

But of course I am not surprised at all that you would give credence to a false analogy, being the hack that you are.

Uh-huh, right. Your ilk douses themselves with patchouli, wear Birkenstocks, and hugs trees on a McDonalds pay check.......and no, I don't want fries with that "dude". I'm doubting seriously that you are anywhere near Obama's moving target "rich" category of >$250,000. But if you were, I'm sure you'd be happy to by 59 to 75% in taxes.

 

[Wiseacre]

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...





No one pays 59% tax on income.

I thought he was talking about the percentage of the total federal taxes paid; I wouldn't be surprised if the top 10% are paying at least 60% of the tax revenues.

Doubtful.

If he were talking about the total federal taxes paid there would not be four men that paid nothing.

If you're just talking federal income tax, I'd say his numbers are about right, but if you add in SS, Medicare, every working person pays that. Some people are getting more money than they paid in, true?

Besides, these days we aren't really talking about tax cuts but rather not raising taxes. Maybe the analogy should be where the cost of the beer goes up to $120 from $100, who pays the extra $20? At what point does the rich guy say eff you, I'm going to a cheaper bar?

 

[DontBeStupid]

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

No one pays 59% tax on income.

I thought he was talking about the percentage of the total federal taxes paid; I wouldn't be surprised if the top 10% are paying at least 60% of the tax revenues.

Kiplinger.com

Speaking only about income taxes, it appears the top 10% pay 70% of income taxes while the bottom 50% pay about 3%. So, talking only about income taxes, this beer story doesn't quite fit with the real world.

Of course, that's strictly speaking about just income taxes, and there are many more taxes we all pay. I'm looking for a site that shows combined totals for all income levels.

 

[Ravi]

I thought he was talking about the percentage of the total federal taxes paid; I wouldn't be surprised if the top 10% are paying at least 60% of the tax revenues.

Doubtful.

If he were talking about the total federal taxes paid there would not be four men that paid nothing.

If you're just talking federal income tax, I'd say his numbers are about right, but if you add in SS, Medicare, every working person pays that. Some people are getting more money than they paid in, true?

Besides, these days we aren't really talking about tax cuts but rather not raising taxes. Maybe the analogy should be where the cost of the beer goes up to $120 from $100, who pays the extra $20? At what point does the rich guy say eff you, I'm going to a cheaper bar?

I repeat. No one pays 59% income tax in this country.

 

[rightwinger]

The problem with your analogy is you assume they are all drinking the same amount of beer. In our society the tenth man claims most of the beer for himself and then leaves the rest to fight over a few sips

 

[auditor0007]

THE TAX SYSTEM EXPLAINED IN 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 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.

David R. Kamerschen, Ph.D.
Professor of Economics.

Lost Napkins: Why "Soaking the Rich" in taxes does not work - explained with BEER!

Yes, I'm certain they will drink their beer overseas where beer prices are twice as much as here. Beer is not taxes.