Taxes in America

Not a deal, but with all the drama about the economy, I will eventually tie this into everything. This little story is great explanation of the way taxes work in this country. I got it from a friend and in it's original form is attributed to a professor of economics at the University of Georgia. However, I decided to change it from ten men drinking beers to ladies drinking vitamin enriched smoothies.

Suppose that every day, ten ladies go out for vitamin enriched smoothies 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 ladies (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 lady (the richest) would pay $59.

So, that's what they decided to do. The ten ladies drank in the smoothie shop 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 vitamin enriched smoothies 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 ladies were unaffected. They would still drink for free. But what about the other six ladies- the paying customers? How could they divide the $20 windfall so that everyone would get her 'fair share?' They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth lady and the sixth lady would each end up being paid to drink her smoothie. So, the smoothie bar owner suggested that it would be fair to reduce each ladies' bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so:
The fifth lady, 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).
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 ladies began to compare their savings.

'I only got a dollar out of the $20,'declared the sixth lady.
She pointed to the tenth lady,' but she got $10!'
'Yeah, that's right,' exclaimed the fifth lady. 'I only saved a dollar, too.
It's unfair that she got ten times more than I!'
'That's true!!' shouted the seventh lady.
'Why should she get $10 back when I got only two? The wealthy get all the breaks!'
'Wait a minute,' yelled the first four ladies in unison.
'We didn't get anything at all.The system exploits the poor!'

Then nine ladies surrounded the tenth and beat her up.

The next night the tenth lady didn't show up for smoothies, so the nine sat down and had smoothies without her. 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 smoothies where the atmosphere is somewhat friendlier.