Suppose that every day, 10 people \u2013- for our purposes, we\u2019ll say reporters -\u2013 go out for beer, and the bill for all 10 comes to $100. If these 10 reporters paid their tab every night the way we pay our taxes, it would go something like this:
\nThe first four, 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, the richest, would pay $59. So that\u2019s what they decided to do.
\nThe 10 reporters drank in the bar every day and seemed quite happy with the arrangement, until one day, the bar owner threw them a curveball. \u201cSince you\u2019re all such good customers,\u201d he said, \u201cI\u2019m going to reduce the cost of your daily beer by $20.\u201d Drinks for the 10 reporters would now cost just $80.
\nThe group still wanted to pay their bill the way we pay our taxes. So the first four were unaffected; they would still drink for free. But what about the other six? How could they divide the $20 windfall so that everyone would get their fair share? These are the reporters after all, so they\u2019re concerned with fairness.
\nThey realized that $20 divided by six is $3.33. But if they subtracted that from everybody\u2019s share, then the fifth reporter and the sixth reporter would each end up being paid to drink beer.
\nSo the bar owner suggested that it would be fair to reduce each man\u2019s bill by a higher percentage the poorer he was. By doing that, he explained, they\u2019d continue following the principle of the tax system they\u2019d been using. So he proceeded to work out the amounts he suggested that each should pay now.
\nAnd so the fifth reporter, like the first four, now paid nothing. He got a 100 percent saving. The sixth now paid $2 instead of $3, a 33 percent saving. The seventh now paid $5 instead of $7, a 28 percent saving. The eighth now paid $9 instead of $12, a 25 percent saving. The ninth now paid $14 instead of $18, which was a 22 percent saving. And the tenth now paid $49 instead of $59, a 16 percent saving.
\nSo each of the six was better off than before. And the first four continued to drink for free. But once outside the bar, the reporters began to compare their savings. \u201cI only got a dollar out of the $20 saving,\u201d declared the sixth reporter.
\nAnd she pointed to the tenth reporter, \u201che got $10.\u201d
\n\u201cYes, that\u2019s right,\u201d exclaimed the fifth reporter. \u201cI only saved a dollar too. It\u2019s unfair that he received ten times more benefit than me!\u201d
\n\u201cThat\u2019s true!\u201d shouted the seventh reporter. \u201cWhy should he get $10 back, when I got only $2? The wealthy gets all the breaks.\u201d
\n\u201cWait a minute,\u201d yelled the first four reporters in unison, \u201cwe didn\u2019t get anything at all. This new tax system exploits the poor!\u201d
\nThe nine reporters yelled at the tenth and made him feel bad.
\nSo the next night the tenth man didn\u2019t show up for drinks, and the nine sat down and had their beers without him. But when it came time to pay the bill, they discovered something important. They no longer had enough money between them all to even cover half of the bill.
\nAnd that, ladies and gentlemen, is how our tax system works. The people who already pay the highest taxes will naturally benefit from a tax reduction, but not the largest percent benefit. Taxing them too much \u2014 attack them \u2014 and they might start drinking overseas, where the atmosphere is somewhat friendlier.<\/p>\n","protected":false},"excerpt":{"rendered":"
Suppose that every day, 10 people \u2013- for our purposes, we\u2019ll say reporters -\u2013 go out for beer, and the bill for all 10 comes to $100. If these 10 reporters paid their tab every night the way we pay our taxes, it would go something like this: The first four, the poorest, would pay … Continue reading Tax Info<\/span>