My Dad sent this along to me. I don’t know if he wrote it or if he read it someplace else. It is not really philosophical, though there are basic questions about fairness embedded here. It is also rather funny.
A brilliant explanation of our tax system, the impact of a tax cut, and the public reaction –
Every day 10 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 look something like this:
The first 4 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 (richest) would pay $59
So that is 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 taxes, so the first four men were unaffected. But what about the other six men – the paying customers? How could they divide the $20 windfall so that everyone would pay their “fair share?”
They realized that $20 divided by 6 was $3.33. But if they subtracted that from everyone’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 man now paid $2 instead of $3 (33% savings)
The seventh man now paid $5 instead of $7 (28% savings)
The eighth man now paid $9 instead of $12 (25% savings)
The ninth man now paid $14 instead of $18 (22% savings)
The tenth man 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 bar, the men began to compare their savings. “I only got $1 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 back $10 when I only got $2? 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 man and beat him up. The next night the tenth man did not show up for drinks, so the nine sat down and had beer without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money among all of them for even half of the bill!
And that my children is how our tax code works. The people who pay the highest taxes get the most dollar 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 or in Mexico where the atmosphere is somewhat friendlier.