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Sat Apr 21, 2012, 07:51 PM

A repub sent this e-mail to me re taxes. I need help to answer..

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 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? 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

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, now paid nothing (100% saving).
The sixth now paid $2 instead of $3 (33% saving).
The seventh now paid $5 instead of $7 (28% saving).
The eighth now paid $9 instead of $12 (25% saving).
The ninth now paid $14 instead of $18 (22% saving).
The tenth now paid $49 instead of $59 (16% saving).

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 a dollar out of the $20 saving," 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 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 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 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 government ministers, is how our tax system works. 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.

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

For those who understand, no explanation is needed.

For those who do not understand, no explanation is possible

34 replies, 12834 views

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Arrow 34 replies Author Time Post
Reply A repub sent this e-mail to me re taxes. I need help to answer.. (Original post)
monmouth Apr 2012 OP
CreekDog Apr 2012 #1
robinlynne Apr 2012 #2
SharonAnn Apr 2012 #6
Kookaburra Apr 2012 #3
SharonAnn Apr 2012 #4
NoGOPZone Apr 2012 #5
otohara Apr 2012 #19
Make7 Apr 2012 #7
pkdu Apr 2012 #8
cindyperry2010 Apr 2012 #9
freshwest Apr 2012 #14
geckosfeet Apr 2012 #10
monmouth Apr 2012 #11
LAGC Apr 2012 #13
Bigmack Apr 2012 #15
monmouth Apr 2012 #17
Bigmack Apr 2012 #24
CBHagman Apr 2012 #26
monmouth Apr 2012 #16
brewens Apr 2012 #12
Egalitarian Thug Apr 2012 #33
dtom67 Apr 2012 #18
baldguy Apr 2012 #20
lunatica Apr 2012 #21
Honeycombe8 Apr 2012 #22
robinlynne Apr 2012 #25
SDjack Apr 2012 #23
zbdent Apr 2012 #27
Motown_Johnny Apr 2012 #28
Creideiki Apr 2012 #29
dsc Apr 2012 #30
jmowreader Apr 2012 #31
B Calm Apr 2012 #32
nevbav Sep 2012 #34

Response to monmouth (Original post)

Sat Apr 21, 2012, 07:55 PM

1. Did Ayn Rand have an alias?

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Response to monmouth (Original post)

Sat Apr 21, 2012, 07:55 PM

2. okay. For starters, the poorest 4, who don't pay taxes, don't ever get any beer.

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Response to robinlynne (Reply #2)

Sat Apr 21, 2012, 07:58 PM

6. And we have a marginal tax rate of 59%? Since when?

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Response to monmouth (Original post)

Sat Apr 21, 2012, 07:57 PM

3. David R. Kamerschen, Ph.D.

says he certainly didn't write this and doesn't know who did, so your repub friend is spreading lies as they all do

http://www.snopes.com/business/taxes/howtaxes.asp

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Response to monmouth (Original post)

Sat Apr 21, 2012, 07:58 PM

4. Actually, the tenth man would pay $15 or less. The 7th, 8th, and 9th would pay $28 - $35.

And there wouldn't be enough money for the drinks so the tenth man would charge it on the credit card of the other 9.

That's our current tax system!

P.S. The actual percentages may vary, but remember that romney paid less than 14%

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Response to monmouth (Original post)

Sat Apr 21, 2012, 07:58 PM

5. You can start here

http://www.snopes.com/business/taxes/howtaxes.asp

Note that there is a David kamerschen PHD who denies authorship.

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Response to NoGOPZone (Reply #5)

Sat Apr 21, 2012, 08:48 PM

19. They Never Check Before Spreading This Nonsense

around...

Even my doctor, who I had to unfriend on FB - was posting this garbage about who doesn't pay taxes. He who just bought a Cayenne Porsche - Why can't he be happy and stop worry about the poor folks not paying taxes?
He's one of those docs who did it for the money.

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Response to monmouth (Original post)

Sat Apr 21, 2012, 07:59 PM

7. That's unrealistic.

If the cost of beer was reduced 20% then they would probably just drink 25% more and the cost therefore would still be $100 - leaving the situation essentially unchanged.

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Response to monmouth (Original post)

Sat Apr 21, 2012, 08:00 PM

8. How 'bout this..." is such a pile of crap , that neither Kamerschen nor anyone else admits to

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Response to monmouth (Original post)

Sat Apr 21, 2012, 08:01 PM

9. the game is rigged from jump

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Response to cindyperry2010 (Reply #9)

Sat Apr 21, 2012, 08:27 PM

14. Anyone who's seen a Kiyosaki seminar, knows it is rigged according to how one makes money.

He delineates the categories, investor, owner, worker. Those making more money, such as professionals, are better off the worker but disadvantaged. He says that the entire tax system is set up to benefit the businessman and investor, etc. This is part of what he says:

The richest don't pay taxes every week, twice a month, monthly or whatever as the poor man does. He holds all his profits all year and accumulates expenses so that the next year he can write it off for whatever reason.

He also has the significant advantage of being able to invest his money and improve his future income throughout the year, since the money's in his hands.

The poor man or working man, if you will, must pay the taxes before he gets his wages. So he ends up with just enough to live on, or if he is making more money, say as a professional, he has some left to invest, but essentially he is still a worker, not someone who gets the breaks as a businessman, whatever.

He goes into more about mortgages, and many things. Also went into something about what Nixon did to change the money supply and how it impacted housing prices, causing inflation. I'm not putting him here as an authority, but he was on PBS during marathons and I finally bought his book.

I found that the advantage between the 'rich' class, or investor or business owner, compared to the working man who is living on a lesser income, to most likely be the reason for the lack of social mobility. I don't think the system was always designed to be that way,.

But since the 'rich' have been getting away with not funding the systems that helped with social mobility, there is an increasingly vicious gap. Hedges spoke about this in his speeches about the failure of the liberal system; that it has been eviscerated and society was the worse for it. But it seems he saw no way of returning to that system that eased the pain of what I guess we honestly may have to call a 'class war.'

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Response to monmouth (Original post)

Sat Apr 21, 2012, 08:07 PM

10. Economic sophistry. Not only is this contrived and inaccurate,

it is self serving and ignorant.

I'll beat the crap out of any rich bastard who pays 10-15% in taxes and says he is being exploited.

(Talk about ignorant)

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Response to monmouth (Original post)

Sat Apr 21, 2012, 08:07 PM

11. Many thanks to you all. I sent the Snopes debunk..nt

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Response to monmouth (Reply #11)

Sat Apr 21, 2012, 08:24 PM

13. Always check Snopes first whenever dealing with an RW chain-mail.

Over 95% of them are all bogus, based on lies.

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Response to LAGC (Reply #13)

Sat Apr 21, 2012, 08:29 PM

15. They now claim that snopes is liberal/socialist/communist...

.. so I expanded my debunks to include Politifact, Factcheck.org, urbanlegends.com, and anybody else I can find.

It actually doesn't make any difference how many sources you cite... they don't believe it.

Gut feelings, dogma, and belief are more important to those people.

I honestly don't think they can help it. I think critical thinking skills are cognitive processes they lack... from birth.

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Response to Bigmack (Reply #15)

Sat Apr 21, 2012, 08:45 PM

17. A college grad too. Sometimes I think he sends me these things just to rile me..LOL..n/t

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Response to monmouth (Reply #17)

Sat Apr 21, 2012, 10:35 PM

24. I had a guy tell me that one time.. he sends just to light me up. I dumped him. That's abuse. nt

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Response to Bigmack (Reply #15)

Sat Apr 21, 2012, 11:08 PM

26. Typical reactions!

I remember when I was fairly new to the forwarded hoax, I got one claiming members of Congress don't pay into Social Security, etc. In fact several people, all of whom had college degrees (and one case an advanced degree), forwarded me the same thing.

I sent out one of those "Folks, this is a hoax" messages, including to someone I didn't know but who seemed to be the source of the email.

By now you know I got back an angry email in which this woman defended her patriotism and started going on about Congress being overpaid, yada, yada, yada -- in other words, she changed the subject, moved the goal posts, did everything but admit she'd bought the story.

These things are the chain letters of the 21st century, and fighting them is still something of a taboo.

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Response to LAGC (Reply #13)

Sat Apr 21, 2012, 08:43 PM

16. I should know by now...n/t

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Response to monmouth (Original post)

Sat Apr 21, 2012, 08:21 PM

12. It's really like the 10th man owned the brewery and already made a fortune on the beer.

He makes more money on beer than he'd ever pay for drinking. No one seems to bring this up but many of the 1% take in more tax dollars than they pay out.

At the top might be a CEO of a weapons manufacturer. His income from selling to the military is 100% tax payer funded. People running oil companies or those managing big pharma do quite well also. Look at all the fuel we buy for the military and federal government.

People heavily invested in the above industries probably come out ahead as well. All those tax dollars actually end up going to people somehow. The big players don't buy a system they are going to lose on.

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Response to brewens (Reply #12)

Sun Apr 22, 2012, 09:49 AM

33. I knew if I read through, some body would bring this up. Thanks. n/t

 

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Response to monmouth (Original post)

Sat Apr 21, 2012, 08:46 PM

18. ask the Prof if they teach percentages at his alma mater.....

The answer is this;
First, there would be 100 men, not 10.
Next, the first 99 men would have to split 1 beer.
the last man ( the richest ) would get all the rest.
The rest of the problem cannot really be solved because the " Professor " is trying to say that the Rich man is paying 59% of the tab. Therefore, he is really saying that the 1% pays 59% of our taxes. I don't believe that is true. Taxes are a function of the percentage of your income, not a percentage of our debt ( the ' tab ' , if you will )
Find out what university this Professor went to and the one he teaches at and Do not send your kids to either!.
I'm a college drop-out and I just pulled his pants down.....
As for the "threat" of the wealthy spending their money outside the USA, the bastards already do it. The percentage of wealth that the rich spend domestically compared to the benefits they receive from making their living here in the Great USA is far less than what the common man spends (as a percentage ) in the area where he lives. Or do you really think that Mcdonalds, Walmart and Home depot all stay open because that is where all the Mitt Romney's of the world spend their money? The truth is, if you give the rich more wealth, they will likely use it speculating, not spending it domestically.
If the Prof is trying to imply that the " Rich " are the "job creators", then he is an idiot. Demand creates jobs, not the wealthy . Any time a pundit says that " if you tax the rich, the rich won't be able to create jobs ", tell him :" That's Great!! That would allow new businesses to start up to meet the Demand that your rich guy refuses to fill because he studied under Dr Kamerschen!! Hell ! let's triple the taxes on those fuckers!


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Response to monmouth (Original post)

Sat Apr 21, 2012, 08:51 PM

20. This is an "L"-curve problem.



http://www.lcurve.org/

The US population is represented along the length of the football field, arranged in order of income.

Median US family income (the family at the 50 yard line) is ~$40,000 (a stack of $100 bills 1.6 inches high.)

--The family on the 95 yard line earns about $100,000 per year, a stack of $100 bills about 4 inches high.

--At the 99 yard line the income is about $300,000, a stack of $100 bills about a foot high.

--The curve reaches $1 million (a 40 inch high stack of $100 bills) one foot from the goal line.

--From there it keeps going up...it goes up 50 km (~30 miles) on this scale!



Guy #10 makes more than 100x Guy #s 1-9 put together. Nearly all of the income gains in the last 20 yrs has gone to the Top 1%. The reason is the Top 10% have wheedled & bribed their way to be in control of the system. The whole game is rigged, and the rich are those who rigged it!

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Response to monmouth (Original post)

Sat Apr 21, 2012, 08:53 PM

21. Respond with one sentence:

Ignorance of the facts is bliss.

Never go on the defensive. Never. They will never, ever respond to logic or true statistics. Just attack back and they'll get on the defensive. If they pursue it then you can respond with real statistics. But I guarantee that they won't pursue it unless they're really stupid. In which case you can just make up something.

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Response to monmouth (Original post)

Sat Apr 21, 2012, 09:07 PM

22. Instead of beer, let's make it a lifesaving innoculation.

You don't get to the end of things, because the first four men (the poorest) would be dead, if they don't get it for free, since they can't afford it.

We're not talking about frivolous things like beer, when we're talking about taxes and healthcare and necessities the govt provides.

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Response to Honeycombe8 (Reply #22)

Sat Apr 21, 2012, 10:59 PM

25. very good point.

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Response to monmouth (Original post)

Sat Apr 21, 2012, 09:11 PM

23. Paying a bar bill and paying taxes on income and wealth are very different.

The rich have a greater stake in the growth and protection of our system. More is required of them.

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Response to monmouth (Original post)

Sat Apr 21, 2012, 11:14 PM

27. tell him to come back to you when

he can start to think on his own, instead of just forwarding whatever comes from Faux ...

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Response to monmouth (Original post)

Sat Apr 21, 2012, 11:32 PM

28. This is fairly easy


This horribly slanted example distributes the beer evenly for everyone. Then they distribute the bill for the beer unevenly.

This is the opposite of reality. The wealthy pay a lower percentage of their income in taxes than lower income groups. Even those who pay no federal income tax still pay a higher percentage in taxes do to state and local taxes.


If you are going to write a response to this insanity I suggest a three tiered attack.

First, wealth is not distributed evenly so the fact that everyone gets a beer in this example distorts everything right from the start.

Second, the wealthy pay a lower percentage of their income in taxes than the rest of us so the price for the beer is backwards too.

Third, noting other than taxes is based on a percentage of your income. If things like rent and food were based on a percentage then things would be similar to what they describe in this horrible little story. Try basing speeding tickets on a percentage of the speeder's income and see how many sports cars get sold to these spoiled rich boys.

The entire thing is a total misrepresentation of reality and you should be able to pick it apart pretty easily if you try.

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Response to monmouth (Original post)

Sat Apr 21, 2012, 11:44 PM

29. This is the outcome of welfare "reform"

When that came down, the liberal Democrats pointed out that if we implemented earned income tax credits instead, that the next thing the conservatives and Republicans would whine about is that the poor people weren't paying their fair share of taxes. And the moderate Democrats assured us that wouldn't happen because that would be obviously mean-spirited. So as usual, the moderate Democrats should have listened to the liberal Democrats.

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Response to monmouth (Original post)

Sat Apr 21, 2012, 11:49 PM

30. One big problem is that this totally ignores other sources of government income (ie taxes)

The fact is that Social Security, Medicare, Unemployment, and other retirement taxes, which are either flat or tax the middle class more than rich, make up 25% of government revenue vs 26% from income taxes. Thus it is more like they are buying just under $200 of beer with the first 100 being paid for as laid out in your post but the second 100 being paid for nearly entirely by the first eight drinkers.

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Response to monmouth (Original post)

Sun Apr 22, 2012, 01:06 AM

31. Let me go at this...

First things first: the idea that a member of the 1 percent would drink with people so poor they have no tax liability is so bizarre, you KNOW a Republican came up with it. We'll ignore that.

And second, the way the example describes the reduction is NOT the way Republicans cut taxes.

We have established that this is the original billing structure:

Drinkers 1-4 pay nothing.
Drinker 5 pays $1
Drinker 6 pays $3
Drinker 7 pays $7
Drinker 8 pays $12
Drinker 9 pays $18
Drinker 10 pays $59

Undisclosed in the original screed, of course, is the relative benefit the various drinkers get; if these men were served beer concomitant with the way government services are distributed...

drinkers 1 through 4 receive a shot glass of beer
drinker 5 receives a three-ounce beer
drinker 6 receives a seven-ounce beer
drinker 7 receives a pint glass
drinker 8 receives a one-liter mug
drinker 9 receives three one-liter mugs
and drinker 10 would get the rest of the keg

In the original message, drinkers 1 through 10 all receive the same amount and type of beer, which is stupid on its face: someone who is charged $57 for one Budweiser is going to tell the bar owner to go to hell after the first time they try it, no matter how much he's needed to "prove" a right wing point. Even if he likes Bud. In the taxation realm that this example is supposed to represent, rich people get a lot more government services than non-rich people do, like keeping pirates off their yachts.

Republicans cut everyone's taxes by the same percentage, so since the bar owner has reduced the tab by 20 percent, this is how it works out:

The first four drinkers still pay nothing. Unfortunately, because of beer cuts required to balance the budget they no longer get any beer. They still have to go to the bar, though.
Drinker 5 pays 80 cents. He now gets a shot glass.
Drinker 6 pays $2.40 and receives the three-ounce glass with a really, really big head on it
Drinker 7 pays $5.60 and receives the seven-ounce glass, but it's only three-quarters full
Drinker 8 pays $9.60 and gets a can of beer.
Drinker 9 pays $14.40 and gets one pint of beer
Drinker 10 pays $47.20, but now the keg they bring him is untapped and it's no longer Bud.

(And yes, the numbers add up to $80; I just double checked it.)

Would drinkers 1 through 9 rebel against this? Yes, but not in the way the RW author envisioned. Drinker 8 sees that his bill went down by $2.40--but he also sees that he now gets a third of the beer he once received. Drinker 9 gets a bill for $3.60 less, which he kinda likes, but not at the expense of losing five-sixths of his original beer ration. Rather than going off on Drinker 10 because his cut is larger than the combined bills of drinkers 5 through 7 and his beer ration has gone up, they track down the bar owner, drown him in a hog lagoon, and hire a more responsible manager to run the place in a manner fair to all.

And that, my Republican friends, is how it works: if Congress writes tax laws that are skewed too heavily to the rich, the non-rich will eventually vote them out and replace them with people who won't do that.

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Response to monmouth (Original post)

Sun Apr 22, 2012, 06:43 AM

32. Cons want the credit for tax cuts,

then bitch about it later.

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Response to monmouth (Original post)

Tue Sep 18, 2012, 02:42 PM

34. propaganda by reps/// and an accurate conclusion to the beer analogy


David R. Kamerschen, Ph.D. denies ever writing this flawed analogy
and if you go to his website he states this.

http://www.truthorfiction.com/rumors/t/taxcuts.htm

http://davidk.myweb.uga.edu/


i will quickly describe why this propaganda is COMPLETELY INCORRECT
AND is insulting to anyone with a basic knowledge of business and
economics.

inherently this simplified version is flawed because it omits very
important variables.
to make this analogy work you would have to detail how much beer each
individual had and what they did after drinking the beer.
the beer is a metaphor for public goods.
a wealthy person will inherently use more of the public goods (because
their economic status facilitates it) than a poor person.
so they proportionally benefit more from our federal system supporting
the public good than a poor person would.
another variable are the consequences/"externatlities" of the use of
the public goods... are they positive or negative?

in this simplified model to accurately reflect the use of public
goods...the rich person would consume more of the public good ( beer
).
by drinking more of the beer (public goods) he would have to go to the
bathroom more than the other men. he would use more water (flush the
toilet, was his hands) , more toilet paper (to wipe his ass), and more
paper towels to dry his hands...so by consuming more he economically
should assume a proportional amount of responsibility... ie pay more
because his behavior uses more.

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