Beer Drinking Analogy of How Progressive Taxes Work - Pirate Lifestyle TV ™ Episode 028

http://www.PirateLifestyle.com Episode for the Pirate Lifestyle TV Show.

The original version of this story started somewhere around 2001, ten years ago, and to the best of my knowledge no one lays claim to being the original author. In fact, I find it very interesting that everyone "blamed" for writing this story flatly denies it!

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


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A humble pirate "thank you" fer doin' this. Arrrrr.


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I have taken it upon myself to update the facts so they more closely reflect today's tax structure. Most notable, in 2000 approximately 40% of wage earners paid no income tax. Today, this number is about 51%. I thought about actually "paying" the non-payers to represent "refundable credits," but decided against this...But I should have.


Ahoy, I'm Capt Rob Lee and welcome to Pirate Lifestyle TV! Arrr

In this episode, I'm going discuss the United States progressive tax system,
you will see what the a$$#@!& politicians in Washington are arguing about,
and hopefully have some fun along the way.

Here is an analogy comparing our tax system and drinking beer.

Suppose every Friday after work ten people go out for beer and the bill for all ten always equals $100. If they paid their bill the way we pay our taxes, it would go something like this:

Five of the people would pay nothing.

The sixth would pay $1.
The seventh would pay $3.
The eighth would pay $12.
The ninth would pay $22.
The tenth person would pay $62.

The ten people drank in the bar every Friday and seemed really happy with the arrangement.

Then one day the owner said, "Since you are all such good customers, I'm going to reduce the cost of your beer by $20."

Drinks for the ten now cost just $80. Sounds like a good deal right?

The group still wants to pay their bill the way we pay our taxes so how would they divide the $20 windfall so that everyone would get a "fair share?" The bar owner suggested that it would be fair to reduce each person's bill by roughly the same progressive amount, and he proceeded to work out the amounts each should pay.

The tenth now pays $51 instead of $62. (17%)

The ninth now pays $18 instead of $22. (18%)

The eighth now pays $9 instead of $12. (25%)

The seventh now pays $2 instead of $3. (33%)

And now the sixth person pays $0 instead of $1. (100%)

Of course the first five continue to pay nothing.

With the new reduced payments, each of the five paying for the beer is better off than before. The person paying the most is paying 17% less, and the person originally paying the least is paying 100% less. And of course, the five drinking for free continue to do so.

Once outside the restaurant, after consuming large quantities of beer, they began to compare their savings.

"I only got a dollar out of the $20," said the sixth person, pointing at the tenth person, "but he got eleven!"

"Yeah, agreed the seventh person, "I only saved a dollar, too. It's unfair that he gets 11 dollars to my one!"

"That's true!" shouted the eighth person, "Why should he get $11 and I only get three? Rich people get all the breaks!"

"Hey, wait a minute," yelled the first five people, "We didn't get any money at all. Nothing!"

The nine people attacked the tenth and beat him up.

The next Friday, the tenth guy 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 anywhere close to enough money between all of them to pay the bill. They didn't even have half the money needed to pay for their beer.

And that, boys and girls, is how our tax system works. If you attack and beat up the people who pay the highest taxes they just may not show up anymore. In fact, they might start drinking beer someplace friendlier.

I hope you enjoyed this pirate lifestyle TV episode. And I hope you enjoy your beer, no matter how much you pay for it.

Aye, livin' the pirate lifestyle be about bein' happy.

With ye help, me goal be ta motivate and stimulate YE friends ta be livin' the pirate lifestyle!

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[loco200069]

beer yum



[PirateLifestyleTV]

@loco200069 Yep, Beer good!! I tried to video this using real beer...10 beers is 5 minutes didn't work out well. :)

[brunomiit]

If you have a proportional tax, you have: person A makes 50.000$ a year, pays 5.000$ in taxes, person B makes 5 million $ a year, pays 500.000$ a year in taxes. There is no need whatsoever for an IMMORAL progressive tax. Enough said.

[PirateLifestyleTV]

@brunomiit Seems pretty fair, and this is what folks call a flat tax.

[luizcadu]

Some corporations are already having their beer in a Chinese bar, if you know what I mean...

[PirateLifestyleTV]

@luizcadu Yep, I know what you mean.

[AndroidPolitician]

@PirateLifestyleTV

As much as I love the lifestyle the analogy doesn't really work. First of all tax cuts usually as a percent of income (the income which this analogy excludes for obvious reasons) are bigger at the top then at the bottom.

The other part is rich people don't actually "leave the bar" and never have, even when taxes were 90% they stayed in the US. What left were factories and jobs but that's a whole different story.

watch?v=P5-fQSPrkkA

[tjw1963]

@qhack Small business of America employ Americans. The fortune 500 is a drop in the bucket and narrow scope for employment. Those rich people want everyone to think they create jobs but they don't. They are setting on their money loop holing their way out of paying taxes.

[qhack]

@tjw1963 Not sure what world you live in, but the 'filthy rich' as you put it employ a huge percentage of America. Just look at any of the Fortune 500 companies.  Or are you one of those who naively believe that you can be filthy rich without having invested in America in some way.

[ananiasacts]

@PirateLifestyleTV, My point is only that real solutions to our fiscal problems exist and are anything but radical or painful (for honest people.) I think our leadership fails because it is both corrupt and incompetent. We have the technology to completely upstage government, as we know it, starting at the most local levels and working upwards. We need only make our political capital itself more tangible--the way currency makes wealth tangible--to bring the magic of efficient markets to bear.