TAX CUTS EXPLAINED

Because it is tax season. . . Let's put tax cuts in terms everyone can 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. "Because 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, is how the 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

For those who understand, no explanation is needed.

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

Huh. That's a thoroughly cool explanation! :-)

"In fact, they might start drinking overseas where the atmosphere is somewhat friendlier."

I wondered y there were so many rich yanks drinking down soi cowboy... this explains all ...cheers bud

Good journal Andrew , but in Australia I pay more tax ( rate ) than a company .

The Government screws the individuals and protects the corporate world .

Not really complaining as I always believe that people work for how much they get after tax ( cash ) and not how much they gross .

Great read. Ironic, and true.

I sell drugs out of my flat and make a killing. I pay zero tax. Am i just an exception to the rule?

Crime pays.

This is only half the story though.

The kind professor forgot to mention that the rich will hire fancy lawyers and tax specialists to make sure that he pays as little or no tax at all.

I had to pay too much tax so i have given up working.....now i pay them nothing...haha got the twats back !!

Buy me a drink !!!

I say we carry on as normal. Rich people generally don't buy cheap things. They wanna drive a Mercedes, wear a Rolex and drink wine that costs more than most folk earn in a week. They wanna show the world how great they are by driving through RCA at 2 in the morning with their big ugly over priced cars.

Let them waste their time. This is a developing country so no one is gonna be impressed if you just squander your cash away. If anything they'll think you're an idiot for doing it right? They surely wouldn't respect you for it?.......... Right??

You've learned quickly boy. You don't mind me calling you boy do you? You're younger than me therefore i'm going to assume i'm better than you and i know more. (TF mentality) Money will get you all the respect in the world. I believe in most cases when someone is pretty stinking rich they've f**ked someone over along the way.

Drive a Mercedes or a BMW here and you can park for free. Dive a tuk-tuk and be laughed at for making an honest day's living. (Well honest as in regards to Thailand)

As for the tax thing, the mush is spot on.