A brilliant explanation of our tax system using actual percentages, the impact of a tax cut, and the public reaction that everyone should be able to understand.
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 the 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.
– Author Unknown (see this Snopes page for a discussion of the various theories of who wrote it).
For those who understand, no explanation is needed. For those who do not, or will not understand, no explanation is possible.
Love the analogy Jeff. It is dead-on in illustrating the progressive tax and the inherent problems with it. I think it is important for us to also understand the real reason that the progressive tax is accepted and even applauded. The FFACT is, “Class envy” is crucial for liberalism to create a villain.
One of the essential components required for liberalism to convince the American people that an ever-increasing government is required, is the need to identify a worthy villain. This villain must be so despicable that without unbridled government, this villain’s sinister plan simply can not be stopped. The rich in America are that perfect villain. The rich are a small percentage of the voting population and who would sympathize with the greedy rich.
It has been a successful ploy. In America, we envy rich people rather than commend them.
Here are a few FFACTS about the rich:
1. The richest 10% of this country pay over 50% of the taxes. Ok that’s fine. They make more they should pay more. But shouldn’t they be commended for that? This means that most Americans don’t have to pay.
2. It is not a zero-sum gain. In other words, it doesn’t matter how much money Bill Gates makes, it does not hinder my ability to make money and be rich. In fact, the more money Bill Gates makes, the more those affiliated with him make. Bill Gates’s wealth has created additional wealth for thousands, if not hundreds of thousands, of people. Everyone in America can become rich if they choose even if there are already rich people. When wealth is created, the pie gets BIGGER creating more slices rather than simply producing smaller slices from the same sized pie.The ONLY zero-sum gain is when the money goes to the government. In this case, not only are the slices smaller but the pie itself gets smaller. Do you think this might lead to government deficits and debt?
3. No cash in a pillow. Bill Gates does not keep his money in his pillow. He buys things which means the money goes to other people. He puts it in a bank which means other people can borrow it to build businesses or buy homes. Just because it’s Bill Gates’s money doesn’t mean that other people aren’t using it and spending it.
So why we should resent rich people again? The FFACT is that those that made it rich in America should be commended. Instead they are successfully portrayed as greedy villains by the liberal forces in our country.
For more information on how our government is stealing and spending our children’s money, see http://theffacts.com/