(Image: Wikimedia Commons)
[This post originally appeared on my old blog in November 2008. It seems worth sharing with a new audience.]
Too many people have been suckered into accepting a ridiculous “class warfare” mentality. The prevailing thought is: “Sock it to those damn rich! That will make us feel better about ourselves! After all, it’s only fair.”
Unfortunately, this misses a few important points. First, the “evil” rich are the ones out there taking risks, creating businesses, creating jobs, and creating wealth. Second, “class warfare” is a Marxist ideal that is completely opposed to the American dream. In America, you have the unique opportunity to make anything of yourself if you’re just willing to put in the hard work. Anyone with a good idea is completely free to turn it into a multi-million dollar business. Ever heard of Walt Disney, Ray Kroc, Harland Sanders (you might know him as Col. Sanders), or Sam Walton?
“Come on, Steve,” you say, “that takes too much hard work. I’d rather sit around and receive my government handout. Those rich make too much profit. They can give some to me. After all, it’s only fair.”
That idea replaces “trickle down economics” with “trickle up poverty.” In a capitalist economy [Note: I should have more properly said a “small business friendly” economy since there’s little difference between “corporate capitalism” and socialism], as people make money, they tend to open more businesses and create more jobs, which creates more wealth for everyone. Oh, and as profits go up, tax income increases as well not only due to the fact that there’s more profit, but there are also more workers paying their taxes (but we don’t want to talk about that).
Today, we want to replace capitalism with Marxist ideals (which by the way worked out just so great in the Soviet Union) that punishes the wealthy and rewards slackers. So instead of everyone becoming better off, we all become worse off – “trickle up poverty.” Fewer businesses are opened, fewer jobs are created, and less wealth is generated. You can’t “spread the wealth” when there is no more wealth left to spread.
Here’s the other dirty little secret: 40% of Americans pay NO income taxes! In fact, most of them get a check from the government for the earned income credit. Meanwhile, the top 5% of Americans are paying nearly 60% of the income taxes. How much more do they need to be squeezed? How much is enough, how much is “fair?”
Is it really “fair” for you to work your butt off so slackers can sit around and do nothing?
Why do we want to keep punishing the “rich?” [Instead of punishing the rich, doesn’t it make more sense to create an environment which allows more people to become rich through their own ingenuity and hard work?]
The story below has been falsely attributed to a Georgia college professor. Even though that’s not who really wrote it, it remains a very clear explanation of our tax system and why the “sock it to the rich” mentality is flawed.
The Tax System – Explained With Beer
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 applying the same percentages that each man paid to the new $80.00 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!’
‘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, 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.
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Semper Alacer 
The Tax System Explained with Beer
(Image: Wikimedia Commons)
[This post originally appeared on my old blog in November 2008. It seems worth sharing with a new audience.]
Too many people have been suckered into accepting a ridiculous “class warfare” mentality. The prevailing thought is: “Sock it to those damn rich! That will make us feel better about ourselves! After all, it’s only fair.”
Unfortunately, this misses a few important points. First, the “evil” rich are the ones out there taking risks, creating businesses, creating jobs, and creating wealth. Second, “class warfare” is a Marxist ideal that is completely opposed to the American dream. In America, you have the unique opportunity to make anything of yourself if you’re just willing to put in the hard work. Anyone with a good idea is completely free to turn it into a multi-million dollar business. Ever heard of Walt Disney, Ray Kroc, Harland Sanders (you might know him as Col. Sanders), or Sam Walton?
“Come on, Steve,” you say, “that takes too much hard work. I’d rather sit around and receive my government handout. Those rich make too much profit. They can give some to me. After all, it’s only fair.”
That idea replaces “trickle down economics” with “trickle up poverty.” In a capitalist economy [Note: I should have more properly said a “small business friendly” economy since there’s little difference between “corporate capitalism” and socialism], as people make money, they tend to open more businesses and create more jobs, which creates more wealth for everyone. Oh, and as profits go up, tax income increases as well not only due to the fact that there’s more profit, but there are also more workers paying their taxes (but we don’t want to talk about that).
Today, we want to replace capitalism with Marxist ideals (which by the way worked out just so great in the Soviet Union) that punishes the wealthy and rewards slackers. So instead of everyone becoming better off, we all become worse off – “trickle up poverty.” Fewer businesses are opened, fewer jobs are created, and less wealth is generated. You can’t “spread the wealth” when there is no more wealth left to spread.
Here’s the other dirty little secret: 40% of Americans pay NO income taxes! In fact, most of them get a check from the government for the earned income credit. Meanwhile, the top 5% of Americans are paying nearly 60% of the income taxes. How much more do they need to be squeezed? How much is enough, how much is “fair?”
Is it really “fair” for you to work your butt off so slackers can sit around and do nothing?
Why do we want to keep punishing the “rich?” [Instead of punishing the rich, doesn’t it make more sense to create an environment which allows more people to become rich through their own ingenuity and hard work?]
The story below has been falsely attributed to a Georgia college professor. Even though that’s not who really wrote it, it remains a very clear explanation of our tax system and why the “sock it to the rich” mentality is flawed.
The Tax System – Explained With Beer
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 applying the same percentages that each man paid to the new $80.00 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!’
‘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, 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.