Sunday, September 30, 2012

A story about the U.S. income tax system

I got this from a friend but apparently it has been circulating around the Internet for a while now. The author is still unidentified, though it has been recently attributed to Dr. David R. Kamerschen from the University of Georgia. He denies writing it. I wish the author would claim it because I think it is pretty good and it highlights two important problems: the way the people of this country think about taxes is flawed and the unintended consequences of taxation. Enjoy.

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 paid $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 got."
"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, ladies and gentlemen, 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.

Wednesday, September 19, 2012

America's economic freedom in free-fall

From the Cato institute. Is this really the kind of America we want? An America that limits economic freedom for all of its citizens? It is certainly not the country that I want to live in.

Tuesday, September 11, 2012

Democrats are pro choice? Hardly. exposes the hypocrisy of the Democratic party with a hilarious video of DNC delegates talking about choices. Democrats are all about choice, as long as people pick the choice that they would pick. If not then they don't like choice. Right delegate from Texas at 1:30?

Pay attention to the lady at 2:11, who is so confused by her party's hypocrisy that she fumbles a key party platform. Hey, don't feel bad green lady. If my political positions contradicted each other I might get confused too. And I think the Flapper at 3:44 basically sums up the Democratic party.

At the DNC, Bill Clinton presented a (false) choice about what kind of country Americans can live in. Either a "you're on your own" country, which he claims Republicans support (I wish they did) or a "we are all in it together" country, which the Democrats promise. Well Slick Willy, if I have to be "in it together" with these winners from the DNC, I will definitely take my chances with the "you're on your own country". Mark me down as a vote for Gary Johnson.