A lesson in Economics

ONE OF LIFE'S MOST DIFFICULT LESSONS. Taught in a tough environment.

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. What happens to 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 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,' 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, 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.

For those who understand, no explanation is needed. For those who do not understand, no explanation is possible.

er yes but cutting taxes when fighting two major wars overseas and borrowing more money off china probably doesn't bade well for the future of anyones beer drinking :twisted:
Why is this neo con parable thread worthy? In terms of economics its accurate, in terms of peoples behaviour to a tax cut it isn't. It not rocket science- you put less or nothing in you get less back if you get a rebate or cut.
UK Governments(Tories) realised this in the seventies and now the UK is one of the least income-taxed countries in the EU.

As for the rest of the taxes we pay, well they are flat-rate and therefore even less fair!

No system is completely fair, besides as London is now the financial capital of the world, the uber-rich have little choice but to be here.
My mate receives this mail from a US friend who was an economist.
I think the joke is that in the states the rich pay little or no taxes thanks to George Bush.
jonwilly said:
My mate receives this mail from a US friend who was an economist.
I think the joke is that in Britain the rich pay little or no taxes thanks to Gordon Brown.
As you might also have written....

So the tenth man who is the wealthiest decides that he is no longer part of the community. Sounds very accurate but demonstrates one of the failures of the system. It also does not address how the ten people acquired what wealth they had or what they do to earn their income.

A very weak analogy IMHO.
Say the wealthiest man had inherited a fortune ten times what he had now and had lost the remainder through incompetence and mismanagement, yet still wound up the richest; and say the 4 poorest worked all the hours God sent on minimum wage yet still couldn't afford a pint on their own because their incomes were without the protection afforded by either unemployment or expensive accountants.

Now who's the virtuous one?

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