Beer Tab Economics: How We All Lose With The Tax Code

Ten friends decided that they would pay for their bar tab the way they pay their taxes. The first $100 beer tab was paid 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

It seemed fair and equitable and they paid the bar tab like this for weeks.

Then one day, since they were such good customers, the bar owner happily announced that he’d reduce their bar tab by $20 to only $80

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So the bar tab was paid like this:

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)

But once they began to think about it, the savings started sounding less fair then they thought.

“I only got a dollar out of the $20 price cut,”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 me!”

“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!”

So, they beat up the richest man and told him they didn’t want him to drink with them any more. He left, of course.

The next night the remaining 9 men went to the bar like always but when they got the bar bill they realized they didn’t have enough money to pay the bill. The bar owner threw them out and banned them from the bar. Now no one had any beer.

Unfortunately, this is how our tax system has devolved. The poor get all the tax breaks, the rich pay all the bills, yet the poor are goaded into thinking it is they that are treated unfairly and they complain until no one has anything. It is unfair, isn’t it? Unfair to everyone.

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