TAX SYSTEM

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 on day, the
owner bowled them an outswing. "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.

David R. Kamerschen, Ph.D.
Professor of Economics
University of Georgia

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