THE TAX SYSTEM EXPLAINED IN
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 ball.
"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 men would 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 ?
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
So, the bar owner suggested that it would be fair to reduce each
man's bill by a higher percentage the poorer he was, to follow the
principle of the tax system they had been using, and he proceeded to
work out the amounts he suggested that each should now pay.
The Fifth man,
...like the first four,
... now paid nothing (100% saving).
The Sixth man,
... now paid $2 instead of $3 (33% saving).
The Seventh Man,
... now paid $5 instead of $7 (28% saving).
The Eighth Man,
... now paid $9 instead of $12 (25% saving).
The Ninth Man,
... now paid $14 instead of $18 (22% saving).
The Tenth Man,
... now paid $49 instead of $59 (16% saving).
Each of the six was better off than before.
And the first four continued to drink for free.
But, once outside the bar, the men began to compare their savings.
"I only got a dollar out of the $20 saving," declared the sixth
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 benefit than me!"
"That's true!" shouted the seventh man.
"Why should he get $10 back,
when I got only $2?
The wealthy get
all the breaks!"
"Wait a minute," yelled the first four men in unison, "we didn't
get anything at all.
This new tax 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 their beers without him. But when it came time to
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 government ministers,
is how our tax system works.
The people who
already pay the highest taxes will naturally get the most benefit from a
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
As both the Mall Arkey and New Republic articles noted, the “How Taxes Work” piece was published (in shorter form) in the letters column of the Chicago Tribune on 4 March 2001, submitted by one Don Dodson:
For those who understand,
no explanation is needed.
For those who do not
no explanation is possible.