I know the election is over, but I had to share one of the best analogies I've seen during the 2012 campaign. A friend of mine posted this on Facebook, and it's too good not to post.
For anyone struggling (like me) to really grasp some of the financial issues and tax problems in this country, this puts it into pretty simple terms for you:
How our tax system works;
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 (the richest) 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, 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
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