An ode to economics and the tax system

An ode to economics and the tax system

8:29 AM, 3rd April 2013, About 12 years ago 82

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An ode to economics and the tax systemI have to confess to not being the author of this piece, I found it on Facebook, but I do think it is very worthy of sharing here.

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 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? The paying customers?

How could they divide the £20 windfall so that everyone would get his fair share?

They realised 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 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.

And so the fifth man, like the first four, now paid nothing (100% saving).

The sixth now paid £2 instead of £3 (33% saving).

The seventh now paid £5 instead of £7 (28% saving).
The eighth now paid £9 instead of £12 (25% saving).

The ninth now paid £14 instead of £18 (22% saving).

The tenth 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 pound out of the £20 saving,” 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 pound 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 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 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 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.

For those who understand, no explanation is needed.

For those who do not understand, no explanation is possible


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17:58 PM, 7th April 2013, About 12 years ago

This is what I never get. The well off always assume they work harder than everyone else. Tried standing at a metal press machine in a hot, dusty, noisy factory eight hours a day or climbing ladders in mid winter lifting tiles onto roofs or half a mile down in Potash mines using pnuematic drills in temps of around 40 degrees c. I know people who do all of these things, none of whom earn over £22,000 pa. If there weren't people to do these jobs we'd have very little to spend our wonga on.

Yes some of us are lucky to have that entrepreneurial spirit and few lucky breaks here and there and perhaps be in a position to take a few risks, which a huge amount of people aren't. But it really sticks in my craw when people do things they generally hugely enjoy for very good reward bang on about how bloody hard they work. Go down a mine mate, find out what hard work really is. Oh you've made my blood boil!

Mark Alexander - Founder of Property118

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19:07 PM, 7th April 2013, About 12 years ago

Gillian - when I left school I worked as a YTS for Dewhusts butchers. When my parents moved to Kings Lynn I went to work in a facory making air conditioning and refrigeration units. I did work on metal presses, de-greasers and a variety of other factory jobs. I worked a split shift of 6am to 2pm and 2pm to 10 pm on alternative weeks. I often worked over time and at weekends. As well as doing this I found work dancing and also studied to be an IFA. I left the factory when I was 19 so actually, I do know what it is to do those jobs. Also, please remember that I come from a Council Estate and went to a below average school. Funny you should mention it but my Grandfather was a Minor for his whole life, always at the pit face but he did manage to work his way up to being head of a rescue team. I didn't feel sorry for myself, neither did my parents, neither did my grandparents. We all aspired to do better. If anything my background made me streetwise. My greatest debt of gratitude is to my parents and Grandparents for teaching me that my destiny is what I choose it to be and that I must take responsibility for my life. I've had plenty of setbacks too let me assure you.

I consider myself fortunate not to have disabilities or to have been born into abject poverty in a country with no education or running water. Yes my daughter had a more fortunate start to her life than I did and I am proud to have provided that opportunity for her. That's why I find it hard to answer some of Tom's questions. There are some things in life we can not choose but we all have some choices. My response to Tom's questions as to what is fair and what isn't is another question - what if there were no hypothetical questions?

Mark Alexander - Founder of Property118

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19:52 PM, 7th April 2013, About 12 years ago

Gillian - please, before you decide to hate what I stand for, please understand who I am by reading this article, then make up your mind >>> http://www.mortgagestrategy.co.uk/the-money-centre-thanks-staff-with-florida-holiday/118056.article

Mark Alexander - Founder of Property118

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19:57 PM, 7th April 2013, About 12 years ago

...... and then read about how my business empire was bought to its knees by criminals, one of which had the Gaul to on that dream holiday at the expense of my company prior to us discovering what he was up to >>> http://www.thamesvalley.police.uk/newsevents/newsevents-pressreleases/newsevents-pressreleases-item.htm?id=160461

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20:11 PM, 7th April 2013, About 12 years ago

Hopefully your Grandfater was a miner not a minor, otherwise I'll have to assume he was Peter Pan! 🙂

I realise you did grotty jobs till 19 but it's really not the same as doing them for forty years. My husband works very hard as an IT consultant. He can earn £600 for doing an hour's lecture. My passion outside work is my smallholding he now cannot believe how backbreakingly difficult producing food is for a miniscule return (tenant hill farmers now earn an average of £12,000pa). He now has some realisation of what 'real' hard work it. And I do it for fun - not because we depend upon it.

I thank my lucky stars I do something I love and get well rewarded for it. I don't need to ask anyone for permission to do anything. I am very hands on with my developments, but because I want to, not because I have to. Five years ago I removed every concrete block wall in a huge bungalow and dug up the concrete floor to the foundations - with one other female helper (combined age 110 at the time!). But at anytime I could have bailed, picked up the phone and got someone in to do it. THAT is the joy of being self employed.

Mark Alexander - Founder of Property118

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20:42 PM, 7th April 2013, About 12 years ago

My Grandfather was indeed a miner and not a minor, although he was a minor when he first went down the pits! Many of his family members died at the coalface, perhaps that's what motivated him to get into rescue? By the way, I did admit to going to a below average school and leaving at 16 Gillian LOL 🙂

Hopefully you will see from my last two post that we are not so different after all. Of course, we will not agree on everything, that's just part of life.

I believe that success is 90% attitude. I employed people for their attitude and many of them are property millionaires themselves now. Two that I am particularly proud of are Tina Garbutt and Anna Kellett. Both were single parents and initially worked in low grade administrative roles for just a few pounds more than they would have received in benefits. They went on to earn six figure incomes and build property portfolio's of their own.

I can't change the world Gillian but I can change the lives of people want to be helped, hence my reasons for creating this website.

When my world fell apart in 2009 as a result of other peoples criminal activities I had a choice of whether to feel sorry for myself or start all over again. Incidentally so did my employees and I'm pleased to say that most of them did what I did.

Mark Alexander - Founder of Property118

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20:42 PM, 7th April 2013, About 12 years ago

My Grandfather was indeed a miner and not a minor, although he was a minor when he first went down the pits! Many of his family members died at the coalface, perhaps that's what motivated him to get into rescue? By the way, I did admit to going to a below average school and leaving at 16 Gillian LOL 🙂

Hopefully you will see from my last two posts that we are not so different after all. Of course, we will not agree on everything, that's just part of life.

I believe that success is 90% attitude. I employed people for their attitude and many of them are property millionaires themselves now. Two that I am particularly proud of are Tina Garbutt and Anna Kellett. Both were single parents and initially worked in low grade administrative roles for just a few pounds more than they would have received in benefits. They went on to earn six figure incomes and build property portfolio's of their own.

I can't change the world Gillian but I can change the lives of people I come into contact with and who want to be helped, hence my reasons for creating this website.

When my world fell apart in 2009 as a result of other peoples criminal activities I had a choice of whether to feel sorry for myself or start all over again. Incidentally so did my employees and I'm pleased to say that most of them did what I did.

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0:51 AM, 8th April 2013, About 12 years ago

Mark - I am not asking you about yourself. Try not to think about yourself when answering the question. Just consider your daughter and the little girl without her advantages. The question is not about you.

Gillian - We are of one mind.

Mark Alexander - Founder of Property118

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7:48 AM, 8th April 2013, About 12 years ago

Tom - I have done my best to answer your question. Here's my final attempt. We do NOT live in a perfect world. Now let's look at your question in a bit more depth. Is it fair that you you live in a country where fresh water is plentiful when other people are stuck in countries with no fresh drinking water? Of course it isn't! I can't change that but I can help and I'd lay a bet with you that I am responsible for the creation of providing more fresh water to residents of Africa than you are my friend. Now are you going to ask me whether I feel bad that I can't help everybody in the world to have fresh water? What is your contribution?

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16:42 PM, 8th April 2013, About 12 years ago

@ Mark - For ages I could not work out why it seemed to difficult to get an answer to this question, but now I think it has become clear. OK you are still talking about yourself in the answer, but it seems clear that you are finally accepting that it is unfair that your daughter has an advantage, from birth, that other children will never have. I say this because I assume that is why you started talking about the unfairness of lack of access to fresh water.

Now, given that it is unfair, and that some children will never have the chances that your daughter has, how can you possibly say that we live in a meritocracy? Given that we do not, it seems fair to me that the lucky ones should not be entitled to retain more disposable income than the others merely due to their good luck in life.

I am not going to address the stories about fresh water or your claims of your own personal philanthropy but I suggest you look up the value of anecdotal evidence. I would explain it but you wouldn’t believe me.

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