Using Beer to Explain Our System of Taxation

This piece has been circulating the internet for some time and according to the version recently forwarded to me by Kurt Epps, David R. Kamerschen, Ph.D. is the author – although this appears to have been refuted by Snopes. It has been making the rounds for the better part of a decade and while no one can be certain who the author really is, the substance of the piece should make any reputable economist reply that he wishes he had written it. This little parable is highly instructive and should be forwarded to every libtard and useful idiot statist in your address book.

Suppose that every day, ten men visit a local tavern 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, since they were only paying $1 and $3.

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, continued to pay nothing (100% saving).
The sixth now paid $2 instead of $3 (33% reduction and $1 saved).
The seventh now paid $5 instead of $7 (28% reduction and $2 saved).
The eighth now paid $9 instead of $12 (25% reduction and $3 saved).
The ninth now paid $14 instead of $18 (22% reduction and $4 saved ).
The tenth now paid $49 instead of $59 (16% reduction and $10 saved ).

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 two dollars out of the $20 saving,” declared the seventh man.

“Yeah, that’s right,” exclaimed the sixth man. “I only saved a dollar.” He pointed to the tenth man, “but he got $10! 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 rich should be made to pay their fair share!”

So 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 made a most unpleasant discovery: even when they combined all the money they had, there wasn’t enough cash between them to cover even half of the bill.

And that, boys and girls, journalists and government ministers, is how our tax system works. Moral of the story? 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.

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3 Responses to Using Beer to Explain Our System of Taxation

  1. Kurt Epps says:

    “…while no one can be certain who the author really is, the substance of the piece should make any reputable economist reply that he wishes he had written it.”

    Priceless.

    I sure wish I had written it as well.