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Taxes explained simply
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Jun 21, 2022 09:46:17   #
OJdidit Loc: Oak Creek Wisconsin
 
This post is 10 years old, but the lesson still applies…

Tax system explained in Beer...

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 ball. "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 men would 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 ? 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 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.

And so the fifth man, like the first four, now paid nothing (100% saving).
The sixth now paid $2 instead of $3 (33% saving).
The seventh now paid $5 instead of $7 (28% saving).
The eighth now paid $9 instead of $12 (25% saving).
The ninth now paid $14 instead of $18 (22% saving).
The tenth now paid $49 instead of $59 (16% saving).

Each of the six was better off than before. And the first four continued to
drink for free. But, once outside the bar, the men began to compare their
savings.
"I only got a dollar out of the $20 saving," 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 benefit than me!"

"That's true!" shouted the seventh man. "Why should he get $10 back, when I
got only $2? The wealthy get all the breaks!"

"Wait a minute," yelled the first four men in unison, "we didn't get
anything at all. This new tax 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 their 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 government ministers, is how our
tax system works. The people who already pay the highest taxes will
naturally 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.

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

Reply
Jun 21, 2022 10:40:17   #
Slimshady Loc: Central Pennsylvania
 
That is exactly how it works and why the rich get richer. Sometimes it pays to keep your mouth shut

Reply
Jun 21, 2022 10:43:04   #
Catfish hunter Loc: Riggins idaho (Paradise)
 
OJdidit wrote:
This post is 10 years old, but the lesson still applies…

Tax system explained in Beer...

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 ball. "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 men would 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 ? 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 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.

And so the fifth man, like the first four, now paid nothing (100% saving).
The sixth now paid $2 instead of $3 (33% saving).
The seventh now paid $5 instead of $7 (28% saving).
The eighth now paid $9 instead of $12 (25% saving).
The ninth now paid $14 instead of $18 (22% saving).
The tenth now paid $49 instead of $59 (16% saving).

Each of the six was better off than before. And the first four continued to
drink for free. But, once outside the bar, the men began to compare their
savings.
"I only got a dollar out of the $20 saving," 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 benefit than me!"

"That's true!" shouted the seventh man. "Why should he get $10 back, when I
got only $2? The wealthy get all the breaks!"

"Wait a minute," yelled the first four men in unison, "we didn't get
anything at all. This new tax 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 their 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 government ministers, is how our
tax system works. The people who already pay the highest taxes will
naturally 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.

For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible.
This post is 10 years old, but the lesson still ap... (show quote)


Very true. Good one OJ👍

Reply
 
 
Jun 21, 2022 13:28:38   #
Jeremy Loc: America
 
The rich pay the least taxes and they love it that way.

Reply
Jun 21, 2022 23:52:28   #
DC Loc: Washington state
 
greed and envy is what traps us in the unfair system we have. still say flat tax on earned income no deductions is the fairest income tax . so at 10% tax if you make $10 000 you pay $1000 if you make $1,000,000 you pay $100,000. everyone has skin in the game and everyone pays the same %of their income but the more you make the more you pay

Reply
Jun 22, 2022 05:55:42   #
Doug Lemmon Loc: Rochester Mills, PA
 
OJdidit wrote:

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


Some will never understand. The poor always want to condemn the wealthy.

But, just remember, the wealthy are why most of us have jobs and the ability to earn what we do.

Reply
Jun 22, 2022 10:41:54   #
dbed Loc: POMME DE TERRE LAKE MISSOURI
 
The rich man still paid 49$

Reply
 
 
Jun 22, 2022 11:10:58   #
Fredfish Loc: Prospect CT.
 
Jeremy wrote:
The rich pay the least taxes and they love it that way.


Wrong.



Reply
Jun 22, 2022 11:58:03   #
DC Loc: Washington state
 
Fredfish wrote:
Wrong.


good chart but of course it is just part of the story only Federal taxes. The t***h is once you factor in all the hidden taxes, state taxes, property taxes, utility tax etc etc even the lower income (bottom 50%) pay upwards to 50% of their income in taxes. Graduated tax rate does not take into account the different cost of living for different areas. for example a quick search showed the average house in washington state at $419,923 that is for the whole state in the seattle area you would be lucky to find a 2000sq foot house for under $800,00. In Nebraska the same search showed the average house being $205,200 which means in some areas I'm sure it is more. As a result the average income for washington state is $90,062 and just over $102,000 in the seattle area while in Nebraska the average income in $66,411. all this leads to the average person in Nebraska will be paying at a lower percentage of their income than the person in Seattle not taking into account that the cost of living is higher which is why they make more. another reason for a flat tax not a progressive tax. I personally have never earned any where near the average income for the area and I figured it out once that I do end up paying right around half of my income in some form of taxes. We really need tax reform and spending reform

Reply
Jun 22, 2022 12:14:23   #
Fredfish Loc: Prospect CT.
 
DC wrote:
good chart but of course it is just part of the story only Federal taxes. The t***h is once you factor in all the hidden taxes, state taxes, property taxes, utility tax etc etc even the lower income (bottom 50%) pay upwards to 50% of their income in taxes. Graduated tax rate does not take into account the different cost of living for different areas. for example a quick search showed the average house in washington state at $419,923 that is for the whole state in the seattle area you would be lucky to find a 2000sq foot house for under $800,00. In Nebraska the same search showed the average house being $205,200 which means in some areas I'm sure it is more. As a result the average income for washington state is $90,062 and just over $102,000 in the seattle area while in Nebraska the average income in $66,411. all this leads to the average person in Nebraska will be paying at a lower percentage of their income than the person in Seattle not taking into account that the cost of living is higher which is why they make more. another reason for a flat tax not a progressive tax. I personally have never earned any where near the average income for the area and I figured it out once that I do end up paying right around half of my income in some form of taxes. We really need tax reform and spending reform
good chart but of course it is just part of the st... (show quote)

I agree DC, that federal income tax doesn't cover all the tax costs one is exposed to. The differences in state taxes are huge
especially property taxes. I pay $3,900 on my little 1,000 sq ft.house, and my friend down south pays $800 for his 2,500 sq ft home. Meanwhile the feds are handing out money to people who don't want to work, while taking more money from those who do.

Reply
Jun 22, 2022 12:24:40   #
DC Loc: Washington state
 
Fredfish wrote:
I agree DC, that federal income tax doesn't cover all the tax costs one is exposed to. The differences in state taxes are huge
especially property taxes. I pay $3,900 on my little 1,000 sq ft.house, and my friend down south pays $800 for his 2,500 sq ft home. Meanwhile the feds are handing out money to people who don't want to work, while taking more money from those who do.


I pay $9000 on 2000sq' home large chunk of my retirement

Reply
 
 
Jun 23, 2022 10:07:46   #
smitty Loc: maine
 
OJdidit wrote:
This post is 10 years old, but the lesson still applies…

Tax system explained in Beer...

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 ball. "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 men would 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 ? 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 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.

And so the fifth man, like the first four, now paid nothing (100% saving).
The sixth now paid $2 instead of $3 (33% saving).
The seventh now paid $5 instead of $7 (28% saving).
The eighth now paid $9 instead of $12 (25% saving).
The ninth now paid $14 instead of $18 (22% saving).
The tenth now paid $49 instead of $59 (16% saving).

Each of the six was better off than before. And the first four continued to
drink for free. But, once outside the bar, the men began to compare their
savings.
"I only got a dollar out of the $20 saving," 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 benefit than me!"

"That's true!" shouted the seventh man. "Why should he get $10 back, when I
got only $2? The wealthy get all the breaks!"

"Wait a minute," yelled the first four men in unison, "we didn't get
anything at all. This new tax 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 their 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 government ministers, is how our
tax system works. The people who already pay the highest taxes will
naturally 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.

For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible.
This post is 10 years old, but the lesson still ap... (show quote)


good 1 oj
but me thinks judging from responses some didnt get the point

Reply
Jun 23, 2022 10:47:27   #
OJdidit Loc: Oak Creek Wisconsin
 
smitty wrote:
good 1 oj
but me thinks judging from responses some didnt get the point


It happens 🤷🏼‍♂️

Reply
Jun 23, 2022 18:21:48   #
Catfish hunter Loc: Riggins idaho (Paradise)
 
Fredfish wrote:
I agree DC, that federal income tax doesn't cover all the tax costs one is exposed to. The differences in state taxes are huge
especially property taxes. I pay $3,900 on my little 1,000 sq ft.house, and my friend down south pays $800 for his 2,500 sq ft home. Meanwhile the feds are handing out money to people who don't want to work, while taking more money from those who do.

That’s one of the biggest reasons I left Oregon in the dust and moved to Idaho. My property tax in Oregon on a 2200 sq ft home was $7,000.00. My buddy in Bend Oregon on Aubrey Butte pays $2100.00/ month property tax. Yes per month. That wasn’t a typo. His property tax, annually is $25,000.00. A 2200 sq ft home here where I am in Idaho is $670.00. Plus WAY nicer people and 100% US citizens and everything is communicated in the English language👍Idaho said “no” to all the free handouts too. If you can’t work that’s one thing. If you just decide not to and live off the government then Idaho is not a good choice for folks. They’re best off to head for Oregon where the free money is available for anyone who don’t feel like working. I had a gentleman on the stage here tell me he’s collecting a disability and don’t really need it from Oregon and tried to convince me to do the same thing. I told him he should feel bad about that and I’d never do it.

Reply
Jun 24, 2022 02:07:14   #
Catfish hunter Loc: Riggins idaho (Paradise)
 
smitty wrote:
good 1 oj
but me thinks judging from responses some didnt get the point

Don’t over tax the rich or we’ll be poor?😉

Reply
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