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Suppose
that every day, ten men go out for a 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 $1.00
The sixth
would pay $3.00
The
seventh would pay $7.00
The eighth
would pay $12.00
The ninth
would pay $18.00
The tenth
man (the richest) would pay $59.00
So that's
what they decided to do. The 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 $20.00."
Drinks for
the ten men now cost just $80.00.
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 their "fair share?"
They
realized that $20.00 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 paid $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," 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 I 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.
For those
who understand, no explanation is needed.
For those
who do not understand, no explanation is possible.
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