Tax the rich?

[SeptRepair]

Just surfing some porn and came across this on THE HUN, Pretty much sums it up nicely

Our Tax System Explained: Bar Stool Economics

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 got' '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, ladies and gentlemen, 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.

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

[Nark]

Great post.

Now only if people could wrap their 15 second attention span around this.

[BigB]

Very good article. As I recall, I posted it approximately 2 years ago. Be prepared for the 5 "non-payers" to step in shortly and purport it's irrelevance.

Two words my friend......"off shore". Live for it...plan for it.

[. ._]

See, that's why it's such a popular website!

-istp

[xsbank]

In this country, a tax reduction usually benefits families or the very poor, the rich rarely get tax breaks, unless you count the GST. The rich buy more stuff. We also pay the top rate of tax at about $75,000 yet in the US its about $275,000.

[Just another canuck]

I don't pay tax... but, well, I'm overseas... LOL

This is brilliant... never thought of like that before.

Great post.

[North Shore]

We also pay the top rate of tax at about $75,000 yet in the US its about $275,000.

Perhaps they should drop their floor in the top bracket considering our national debt is in the neighbourhood of $500 billion (and shrinking), whilst theirs is closing in on $10 trillion and rising...

[Dust Devil]

In this country, a tax reduction usually benefits families or the very poor, the rich rarely get tax breaks, unless you count the GST. The rich buy more stuff. We also pay the top rate of tax at about $75,000 yet in the US its about $275,000.

Or have one tax rate for everyone.

[bmc]

Excellent post. Not the original author though, but great example. Thanks for that. Here's what's posted on Snopes.

http://www.snopes.com/business/taxes/howtaxes.asp

[Driving Rain]

Our Tax System Explained: Bar Stool Economics

Thie only thing wrong with that theroy is everyone in Canada, rich or poor pays the same price for beer.

[xsbank]

Wrong. 4 large Guinness cans $8.49 in Quebec, $13.95 in BC. Such a deal.

[pilotbzh]

http://www.thebeerstore.ca/Beers/pricel ... UB+DRAUGHT

Ontario 11.75

Quebec has more taxes but cheapper beer

[Driving Rain]

I stand corrected.
The only thing wrong with that theory is everyone in Canada rich or poor pays the same for beer but prices vary from province to province.

[SeptRepair]

Excellent post. Not the original author though, but great example. Thanks for that. Here's what's posted on Snopes.

http://www.snopes.com/business/taxes/howtaxes.asp

Thanks for the link. Makes you wonder why people try and take credit for others work.

[xsbank]

This reminded me of Paul Martin, the famous Liberal Prime Minister - can't think why...

"Ok - now say I am the owner of the older boatyard next door. I sell my yard to an investor who issues stock to himself and mortgages the yard 100% with debt to buy the yard. He even got the local development authority to let him issue tax-exempt industrial development bonds, so his interest cost is 40% lower than his competitors. You know, because he is keeping jobs in the area and all, he gets this perk. At the same time, he negotiates a property tax break and gets grants and special zoning permits to build a larger paint house. So now he has lower overhead and interest cost than any of his competitors and pays virtually no taxes. He lobbies the government and convinces his local congressman to alter zoning for any future yards to insure that any new yard will cost 5 times what it took to build his yard. This protects his little monopoly on his side of the harbor. Also, the smaller competitor across the harbor - that's you, Bob - gets monthly citations and violations from the local health inspector and zoning department, because they were elected with money from this guy. You lose 5 workdays a quarter due to this plus added legal, penalty and administrative fees. This is all legal and thanks to local politicians. He then incorporates into a holding company, based in the Cayman Islands, which owns 100% of the stock. He pays his workers minimum wage and pays himself a nominal salary. He also creates a special dividend, which will pay the holding company 100% of free cashflow every quarter. As holder of all of the shares in the Caymans, he gets all of this money sent to his Cayman bank account; where he classifies it as carried interest and only pays deferred taxes on it at the dividend tax rate. Of course this is after deducting his corporate expenses in the Caymans - like his beachfront house, yacht for entertaining, and private jet. This goes on for 10 years until the yard is outdated due to lack of re-investment. Times get rough for the yard despite his minimum wage workers, so he has to file the boatyard into Ch. 11. There is no cash in the accounts (shocker) and nobody wants to buy the outdated yard. After cramming down the bondholders to 20 cents and using the meager pension fund as an asset, he takes the yard out of bankruptcy by selling it to a Japanese conglomerate; paying himself a hefty reorganization fee in the process. The Japanese company appoints him an honorary director and pays him a nice salary - to his Cayman Account - for the rest of his life. It then fires all of the yard workers, after paying them 5 cents on the dollar out of their pension fund. The workers can't find work at another yard because the new zoning rules have kept any new ones from being built. And the Japanese comglomerate just replaced the workers with robots. Japanese robots."