My previous post about "How the Stockmarket Works", prompted me to post this one:
Tax 101
Suppose that every day, ten men go out for beer and the bill for all ten comes to R100. 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 R1. The sixth would pay R3.
The seventh would pay R7. The eighth would pay R12.
The ninth would pay R18.
The tenth man (the richest) would pay R59.
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 R20. "Drinks for the ten now cost just R80. 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 R20 windfall so that everyone would get his `fair share?`
They realized that R20 divided by six is R3.33. 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 first four men (the poorest) would still pay nothing.
The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid R2 instead of R3 (33%savings).
The seventh now pay R5 instead of R7 (28%savings).
The eighth now paid R9 instead of R12 (25% savings).
The ninth now paid R14 instead of R18 (22% savings).
The tenth now paid R49 instead of R59 (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 one Rand out of the R20," declared the sixth man. He pointed to the tenth man," but he got R10!" "Yeah, that`s right," exclaimed the fifth man. "I only saved a Rand, too. It`s unfair that he got ten times more than I!" "That`s true!!" shouted the seventh man. "Why should he get R10 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.
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.
PS. The picture above has nothing to do with this post... did you try to figure out what the graph shows? I don't know myself!
No comments:
Post a Comment