I sure wish I could claim this as an original material analogy, but it comes from an Economics Professor at the University of Georgia, and I only saw it as an outsider's comment so I could not Re-blog it in the author's name.
I believe this is the best explanation available to bring true understanding of the United States Tax system, and its political manipulation for the majority of Americans.
Suppose that every day, ten plumbers 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 plumbers (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 plumber, Joe (the richest) would pay $59.
So, that's what they decided to do. The ten plumbers 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 plumbers still wanted to pay their bill the way we pay our taxes so the first four plumbers were unaffected. They would still drink for free. But what about the other six plumbers - 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 plumber and the sixth plumber would each end up being paid to drink his beer. So, the bar owner suggested
that it would be fair to reduce each plumber's bill by roughly the same amount, and he proceeded to work out the amounts each should pay!
And so:
The fifth plumber, 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).
Joe, 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 plumbers began to compare their savings.
'I only got a dollar out of the $20, 'declared the sixth plumber. He pointed to Joe, 'but he got $10!'
'Yeah, that's right,' exclaimed the fifth plumber. 'I only saved a dollar, too. It's unfair that he got ten times more than I!'
'That's true!!' shouted the seventh plumber. 'Why should he get $10 back when I got only two? The wealthy get all the breaks!'*
'Wait a minute,' yelled the first four plumbers in unison. 'We didn't get anything at all. The system exploits the poor!'
The nine plumbers surrounded Joe and beat him up.
The next night Joe 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.
David R. Kamerschen, Ph.D.
Professor of Economics, University of Georgia
For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible
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