THE TAX SYSTEM EXPLAINED IN BEER (AND WINGS TO REFLECT OUR COMPLEX TAXATION SYSTEM)

A response to “THE TAX SYSTEM EXPLAINED IN BEER”

http://www.notoriouslyconservative.com/2009/08/tax-system-explained-with-beer.html

Suppose that every day, two friends go out for beer and wings, and the bill for the beer and wings comes to $77.

If they paid their bill the way we pay our taxes, it would go something like this…

Mr. Middle Class would pay $17.
Mr. Super Rich (because he is super rich) would pay $60.

So, that’s what they decided to do.

Mr. Super Rich paid for the beer, for which the special was six beers for ten dollars each.

Mr. Middle Class paid for the 25 cent wings, of which they always ate exactly sixty-eight each night.

The two men ate and drank in the bar every day and seemed quite happy with the arrangement.  For an entire year the ritual was made unbroken, until one day Mr. Middle Class was sick and Mr. Super Rich dined alone.

The next day, the owner threw them a curve ball. “Since you are all such good customers,” he said, “I’m going to reduce the your bill by twenty dollars”.  The total bill for the two men would now cost just $57.

The two still wanted to pay their bill the way we pay our taxes.

Mr. Middle Class 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.

Mr. Middle Class would pay $11.50 instead of $17 (32% saving).
Mr. Super Rich now paid $47.50 instead of $60 (21% saving).

Mr. Middle Class was overjoyed.  He and Mr. Super Rich were friends and he loved their daily ritual, but he could really use the extra $38.50 per week.  Sure Mr. Super Rich could afford to continue to pay more, but who was he to complain?  He was saving $154 a month!  But once they got their bill he realized that the deal didn’t quite work out the way he had thought.

“Oh!” said Mr. Super Rich. “It looks like the $20 was taken off the price of the beer.  Let’s see…that makes my part of the bill $40.  Yours is still $17.”

Mr. Middle Class was very sad, even angry.

When the bartender promised them $20 off their bill he didn’t understand that it was a reduction on a specific part of the bill and not the entire bill.  He wouldn’t mind not getting as much of a discount as Mr. Super Rich since Mr. Super Rich paid much more than he did every day, but for Mr. Super Rich to get an extra $140 a week and him to get nothing?!?  It made Mr. Middle Class start to suspect that Mr. Super Rich had made a deal with the bartender.  Hmmm…perhaps that day he was sick.  Is it possible that Mr. Super Rich would work out a deal, not to save money, but to specifically screw over Mr. Middle Class.  It was starting to seem that way.

It seemed even more that way when the price of wings went up to thirty cents a wing and the price of beer stayed the same.

And that, boys and girls, journalists and government ministers, is how our tax system works.  Sometimes it appears that the people who already pay the highest taxes will naturally get the most benefit from a tax reduction.

But if the rich take advantage of the middle class too often, attack them for being greedy, they just may not be your friend any more. In fact, they might start planning on standing up to the bartender and demand that the price of wings go down the same amount as the price of beer.  If the bartender refuses…well, perhaps Mr. Middle Class will get his Middle Class friends together and run the bartender out of town.

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