Taxes....

I'm assuming this little parable only includes income tax but I got a laugh out of it.

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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. 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, 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.

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There ain't nothing like a 10 year old college assignment turned email chain letter.

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Originally Posted by Ominous Gamer

There ain't nothing like a 10 year old college assignment turned email chain letter.

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Yes but it makes a point that people can understand.

Really? Do people who don't have money socialise with rich people on a regular basis in the US ?

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Originally Posted by Lewkowski

Yes but it makes a point that people can understand.

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Sadly the opinion at the bottom has been altered from the way the original assignment was written. I wouldn't be surprised if thats caused you to miss the point on the entire piece.

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Originally Posted by Hazir

Really? Do people who don't have money socialise with rich people on a regular basis in the US ?

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:bulb: This isn't the feudal era. There are obviously social cliques, but there is nothing that resricts people of current economic standing from growing up together, sharing similiar interests, or knowing a good bar.
Besides, being the poorest doesn't mean "no money."

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Originally Posted by Hazir

Really? Do people who don't have money socialise with rich people on a regular basis in the US ?

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Yeah, I'm not getting this, dude. Most of my peers are in the 15% tax bracket right now, but my wife's coworkers are in the 25% bracket, and both of our bosses are in the 28-33% brackets. I'm friends with a number of people who get money back (and get WIC/food stamps/etc. besides), mostly because they are low income and have children. In my broader circle, I regularly spend time with people on the 'very rich' end of the spectrum (though, to be fair, only a handful) all the way down to really struggling. Why is this unlikely?

Of course, that doesn't make Lewk's post have any merit, but that's a separate issue.

Perhaps he was referencing the fact, that the "beer in a bar" analogy implies that the rich and the poor live their lifes at a roughly equal basis, which is silly.

The poor aren't drinking the same beer daily as the rich.
They get half a beer.
Of Pabst.
On certain holidays during the year.

At least, until the beer welfare runs out.

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yeah, I'm not getting this, dude. Most of my peers are in the 15% tax bracket right now, but my wife's coworkers are in the 25% bracket, and both of our bosses are in the 28-33% brackets. I'm friends with a number of people who get money back (and get WIC/food stamps/etc. besides), mostly because they are low income and have children. In my broader circle, I regularly spend time with people on the 'very rich' end of the spectrum (though, to be fair, only a handful) all the way down to really struggling. Why is this unlikely?

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An argument like this is when you should complain about anecdotal evidence. Though if the purpose is to just show it's possible, then this is sufficient...

What horse shit. First, in the real world the effective tax rate on the upper middle class is actually higher than that on the upper class. Second, in the real world the wealthy get far more from the government than do the poor, even those poor receiving government support. So in your little parable, the rich guy gets drunk and the poor just get a little beer.

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Originally Posted by Lewkowski

I'm assuming *** the atmosphere is somewhat friendlier.

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What's the point of this? To show why when you do a flat rate tax cut across the board the wealthy get the biggest benefit? Okaayyyyy..... So why the absurd conclusions?

You know, what might make the exercise more interesting is to show the relative weekly incomes of the beer drinkers vs. their weekly costs. For example:

The first four men (the poorest) would pay nothing ---
-- They make minimum wage. Here in Michigan that's $7.40/ hour, or $296/ week before SS and Medicare are taken out. I hope their wives have good jobs because they're going to have a hard time moving out of mom & dad's house. With their used car payments, minimum car insurance, the money their moms or buddies charges them to rent a room, and what they pay to buy consumables, they live check to check.

The fifth would pay $1 ---
---This guy makes $12/ hour, or 480/ week before SS, Medicare and income tax. I think he's considered above the poverty line. (Yeah, maybe in rural Alabama.) With his cheap appartment or trailer payment, car & insurance payments, utilities, consumables, etc this guy lives check to check too.

The sixth would pay $3.
-- This guy makes $15/ hour, or $600/ week before SS, Medicare and income tax. This guy's job has a 401k and he puts about $25/ check in to save for the future. Otherwise his rent/ transportation, consumables, etc take up the rest of his check. He might stash some away for special things, like a skiing weekend or something. He's married and his wife works which helps a lot, but she's making minimum wage. Thank god they don't have kids yet because his insurance sucks and kids are expensive as hell.

The seventh would pay $7.
This guy makes $24/ hour or $961/ week before SS, Medicare and income tax. Halfway to six figures, this guy puts a $100/wk into his company's 401k. He takes classes on the side toward an advanced degree and his company pays half the tuition. He and his wife spent 3 years saving for a down payment on a house and they're paying extra each payment. Every second year they take a vacation someplace warm, drive down South, but not next year because, congratulations, she's pregnant! Got to put that vacation money toward the baby's room.

The eighth would pay $12.
This guy makes $43/ hour or $1731/ week before SS, Medicare and income tax.
This guy's middle class. He works hard, plays hard, lives in a decent neighborhood, saves a lot in his 401k, has an emergency fund, is saving in the State college tuition fund for his son and takes a nice vacation every year. His wife is the next bracket down so they do alright. He's going to get a 60" flat panel before football season starts in the fall. Life is good.

The ninth would pay $18.
This guy makes $72/ hour or $2,885/ wk before SS, Medicare and income tax.
- This guy's doing great, especially with his wife's income added in. They max out their 401ks and travel for pleasure every year. They drive newer cars and live in a nice house in a nice neighborhood. Next year they're going to Europe for two weeks. They use the state tuition program too for their two kids and they keep a solid 3 months income in the bang in case of emergency.

The tenth man (the richest) would pay $59.
This guy makes $240/hour, or $9,615/ week before Medicare and SS and income tax. He's in the highest tax bracket. He can pay the whole bar tab with less than a 1/2 hour's wages. He and his wife get a new car every year, he has a huge house, he travels for pleasure several times a year, his kids go to private school and have an in-home tutor/nanny. He maxes out his and his wife's 401k every year, he has an after tax investment account and saves & invests more money every year than the first 7 make. Both kids future out of state college are already paid for. Its good to be the king.

How fair is it the tenth man pays a higher proporation of his taxes than the first nine? If you need X dollars to fund civlization, to get there with a flat tax you'd put a lot more hardship on the borderline and lower middle class guys than they already have. Whereas if the top guy pays a higher proportion of his own income to give them some relief, he hardly notices it, but the guys down the line benefit a hell of a lot.

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Originally Posted by EyeKhan

How fair is it the tenth man pays a higher proporation of his taxes than the first nine? If you need X dollars to fund civlization, to get there with a flat tax you'd put a lot more hardship on the borderline and lower middle class guys than they already have. Whereas if the top guy pays a higher proportion of his own income to give them some relief, he hardly notices it, but the guys down the line benefit a hell of a lot.

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Except for two things:
1) Top income bracket doesn't pay as much proportionately in taxes. Guy #10 would be paying about as much, proportionately, as guy #9, and a little more than guy #8. Lewk can recalculate his propaganda based on a more realistic scale.
2) Guy #10 is in, what, the 99th percentile? Yet he's only making 500K per year. Not much by current executive standards. So those beers aren't half an hour's work, it's probably more like a few minutes.


The famous "I like taxes. With them I buy civilization" quote from Oliver Wendell Holmes is widely thought to refer to roads, schools, and other infrastructure. But that's not what he meant at all. He meant a) a stable society (i.e. minimal violence and no revolution) and b) a society that readily favors creativity, hard work and the ability to make money. The infrastructure part of that is the least important. One of the most important functions of government in my mind is to minimize the number of desperate people. Desperate people are dangerous. VERY dangerous. They don't need much to keep from being desperate, but it very much behooves us to make sure that they don't get there.

This is the typical problem with "pure" philosophies: they don't actually work. Pure free markets have four fundamental flaws:
1) They will inevitably lead away from "free" markets, because free players will strive to tip the game their way. Always.
2) Like Darwinism, they are vicious and harmful to individuals.
3) They don't provide for the long-term stability of the system, but rather short-term gain. Therefore they never recognize that you need to bring most population segments along when creating wealth, or those not included will realize they are no longer vested in the system
4) They are short-sighted, and therefore will never invest in long-range transformative trends. Further, they won't reward individuals who do think long-range.

That's why unfettered free markets, the extreme stance, are not viable. One needs to make sure that the system is both relatively healthy, and that most people see it in their best interests to buy into the system. Utopian pipe dreams like flat taxation are hopelessly naive in this regard.

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Originally Posted by ']['ear

Except for two things:
1) Top income bracket doesn't pay as much proportionately in taxes. Guy #10 would be paying about as much, proportionately, as guy #9, and a little more than guy #8. Lewk can recalculate his propaganda based on a more realistic scale.
2) Guy #10 is in, what, the 99th percentile? Yet he's only making 500K per year. Not much by current executive standards. So those beers aren't half an hour's work, it's probably more like a few minutes.


The famous "I like taxes. With them I buy civilization" quote from Oliver Wendell Holmes is widely thought to refer to roads, schools, and other infrastructure. But that's not what he meant at all. He meant a) a stable society (i.e. minimal violence and no revolution) and b) a society that readily favors creativity, hard work and the ability to make money. The infrastructure part of that is the least important. One of the most important functions of government in my mind is to minimize the number of desperate people. Desperate people are dangerous. VERY dangerous. They don't need much to keep from being desperate, but it very much behooves us to make sure that they don't get there.

This is the typical problem with "pure" philosophies: they don't actually work. Pure free markets have four fundamental flaws:
1) They will inevitably lead away from "free" markets, because free players will strive to tip the game their way. Always.
2) Like Darwinism, they are vicious and harmful to individuals.
3) They don't provide for the long-term stability of the system, but rather short-term gain. Therefore they never recognize that you need to bring most population segments along when creating wealth, or those not included will realize they are no longer vested in the system
4) They are short-sighted, and therefore will never invest in long-range transformative trends. Further, they won't reward individuals who do think long-range.

That's why unfettered free markets, the extreme stance, are not viable. One needs to make sure that the system is both relatively healthy, and that most people see it in their best interests to buy into the system. Utopian pipe dreams like flat taxation are hopelessly naive in this regard.

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Another note - SS tax is capped at 106k. So once the higher income guys make that amount, their effective tax rate drops.

The top tax bracket starts, iirc, at 250k. So I picked someone solidly in there but not ridiculously so. There's lots of 500k earners out there, but not so many 100M earners.

Also - by that quote, I understood it to mean the social, legal & economic as well as physical infrastructure of society. :)

Yeah, wasn't rebutting you, just elaborating.

The thing is that Lewk would call this liberal. But it's not, really (or at least not compared to the real political spectrum, but that is a world where the John Birch Societ...err, the Tea Party is not mainstream). What it is is pragmatic. I definitely want a world where earnings, both for normal folks and corporations, are maximized, and free markets are by far the best path to this as long as we avoid their inevitable excesses. I'm just not a naive blockhead to believe that cutting taxes on the wealthy and removing the social safety net is a good path to a free society. Lewk is trying to recreate the society that turned a lot of people to Communism. IMO that's stupid, but those people turned to Communism for a reason: it was more likely to give them what they needed from the world. What he fails to understand is that the best way to avoid full-blown Socialism (or worse, Communism) is by making sure that folks don't get desperate.

Yeah! People who don't pay taxes beat up those who get a tax break. That is exactly how the tax system works. And here I was, thinking that this shit was complex, but there is Lewk to simplify the matter in terms even he can understand.

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Originally Posted by Lewkowski

Yes but it makes a point that I can understand.

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Question. Why is this garbage in D&D? Is Debate and Discussion the correct place to fart bullshit brainnumbing email chainletters?

Yes?

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Yeah! People who don't pay taxes beat up those who get a tax break. That is exactly how the tax system works. And here I was, thinking that this shit was complex, but there is Lewk to simplify the matter in terms even he can understand.

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Its a metaphor. The "beating" is the class warfare BS about how the rich need to pay their "fair share" when they already pay well above what others pay.

A beer drinking metaphor? What frivolous "free perk" is the beer supposed to represent? :confused:

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Originally Posted by Lewkowski

Its a metaphor. The "beating" is the class warfare BS about how the rich need to pay their "fair share" when they already pay well above what others pay.

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They pay less than I do.

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Originally Posted by Lewkowski

Its a metaphor. The "beating" is the class warfare BS about how the rich need to pay their "fair share" when they already pay well above what others pay.

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Just saying "it's a metaphor" doesn't make it an accurate metaphor. And "class warfare"? Dramatic dude.

So, since this is a metaphor, I learn from it the shit only hit the fan when taxes were decreased. Using the metaphor in exactly the same manner you did, I think it clearly shows that cutting taxes is a bad idea because it drives out those who are successful. And that, boys and girls, journalists and college professors, is how our tax system works.

Yeah, seems like everybody was happy untill they started cutting taxes :)

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Originally Posted by ']['ear

They pay less than I do.

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In dollars?

No, Yen. :rolleyes:

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Originally Posted by ']['ear

No, Yen. :rolleyes:

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At least it's not the Chinese yuan, nobody's really sure what that's supposed to be worth, though most agree it's more than it is. Does that make sense?

No, I was just saying that I had a yen for some Chinese food.

I had Japanese last night at a restaurant we frequent. Had to send my asparagus roll back because they made it with squishy brown asparagus. WTF? Like the cook didn't know it had gone bad. It opens a trust issue, that's how you lose regular customers.

Ugh. My bet would be that they used canned asparagus. Good God yes, that's a bad precedent.

Me, I rarely eat Japanese. It's crass, but I've always been a guy who needs lots of calories (until I got chronic fatigue, I had trouble keeping weight on). Sushi and Tapas always bugged me because I'd either a) spend an arm and a leg for foo that wasn't worth it, or b) go home and eat a second meal. Neither seemed worth it. We've got a place in town ranked in the best 50 by Gourmet magazine, and it truly rocks. Certainly that was even more true in the Bay Area. So why would I eat sushi or tapas when I can get a world class meal for half the price? That's gone away some as I've got older and heavier, but I still have the bias.

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Originally Posted by Lewkowski

Its a metaphor.

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Oh well if its a metaphor then my anecdotal evidence of an experience I had should completely blow apart the flat tax idea. See, one time my friends and I* went out to a restaurant. We decided to use I guess what would equal a flat tax for dining. Everyone would pay the same amount, based on what was ate. Those of us who didn't have much money ate modest meals, while those people who had more money had appetizers, salads, and drinks with their expensive meals. When it came time for the bill, those of us who ate reserved meals ending up paying more for less food, while those who took advantage of the situation ended up paying less while getting more. But at least we all paid the same flat amount for the total bill right Lewk?


* - screw you Tear thats how I'm using it :mad::up:

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Originally Posted by ']['ear

Ugh. My bet would be that they used canned asparagus. Good God yes, that's a bad precedent.

Me, I rarely eat Japanese. It's crass, but I've always been a guy who needs lots of calories (until I got chronic fatigue, I had trouble keeping weight on). Sushi and Tapas always bugged me because I'd either a) spend an arm and a leg for foo that wasn't worth it, or b) go home and eat a second meal. Neither seemed worth it. We've got a place in town ranked in the best 50 by Gourmet magazine, and it truly rocks. Certainly that was even more true in the Bay Area. So why would I eat sushi or tapas when I can get a world class meal for half the price? That's gone away some as I've got older and heavier, but I still have the bias.

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Well, calories stick to me like glue. The fewer the calories the better. The asparagus was fresh, blanched a little. There were several stalks in one roll, one being obviously past it's prime. The "chef" should not have served it. My guess is since it was in a roll, his guess was I wouldn't notice. Bad message to me.

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Originally Posted by Illusions

Oh well if its a metaphor then my anecdotal evidence of an experience I had should completely blow apart the flat tax idea. See, one time my friends and I* went out to a restaurant. We decided to use I guess what would equal a flat tax for dining. Everyone would pay the same amount, based on what was ate. Those of us who didn't have much money ate modest meals, while those people who had more money had appetizers, salads, and drinks with their expensive meals. When it came time for the bill, those of us who ate reserved meals ending up paying more for less food, while those who took advantage of the situation ended up paying less while getting more. But at least we all paid the same flat amount for the total bill right Lewk?


* - screw you Tear thats how I'm using it :mad::up:

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That sounds like communism. And I thought Tear had ok'd your usage...

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Originally Posted by ']['ear

No, Yen. :rolleyes:

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Missing my point. Do you pay more in dollars then someone who makes more money but pays a lower percentage?