That’s an honest question, worth addressing – in a non-political way. Let’s address that question using Bar Room Economics –
THE U.S. TAX SYSTEM EXPLAINED IN BEER.
Suppose that every day, 10 men go out for beer, and the bill for all 10 comes to $100. If they paid their bill the way we pay our taxes, it would go like this:
The 1st thru 4th (the poorest) would pay nothing.
The 5th would pay $1.00
The 6th would pay $3.00
The 7th would pay $7.00
The 8th would pay $12.00
The 9th would pay $18.00
The 10th man (the richest) would pay $59.00
Four will drink beer FREE, but each drink the same amount of beer as everyone else.
One person (#10) pays more than half of the bill, yet drinks only the same amount of beer as everyone else.
So, that’s what they decided to do. Seems fair. It’s kind of the way we pay our taxes.
The 10 men drank in the bar every day and seemed quite happy with the arrangement, until one day…
The owner said: “Since you are all such good customers, I’m going to reduce the cost of your daily beer by $20. Drinks for the 10 of you will now cost only $80, instead of $100.”
The group still wanted to pay their bill the way we pay our taxes, so the first four men (the poorest) were unaffected – they would continue drinking for free. The cost-savings would not affect them, because they can’t pay less than zero.
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 5th man and the 6th man would each actually end up being paid to drink his beer.
So, the bar owner suggested that it would be fair to pro-rate the $20 savings, reducing each man’s bill by roughly the percentage of the total bill he was paying before, and he proceeded to work out the amount each should pay.
The first 4 continue drinking for free, as before.
The 5th man (like the 1st four) would now pay nothing (100% savings).
The 6th man would now pay $2.00 instead of $3.00 (33%savings).
The 7th would now pay $5.00 instead of $7.00 (28%savings). The 8th would now pay $9.00 instead of $12.00 (25% savings).
The 9th would now pay $14.00 instead of $18.00 (22% savings).
The 10th would now pay $49.00 instead of $59.00 (16% savings).
Each of the six “previously-paying customers” was better off than before, and the first four plus one, drank for free.
But once outside the bar, the men began to compare their savings….
1st thru 4th Men (who were still drinking their beer for free). Yelled:
“Wait a minute,” We didn’t get anything at all! The system exploits the poor!”
5th Man (who was now drinking FOR FREE): “I only saved $1.00! That’s unfair!”
6th Man: “I, too, only got $1.00 out of the $20 savings.”
Then he pointed to the 10th man and said, “But HE got $10 of the $20! – HALF of ALL of the savings.”
7th Man: “That’s true! Why should he get $10 back when I got only $2.00?
The wealthy get all the breaks!”
8th Man: “I only saved $3 – that’s a mere 15% of the savings!”
9th Man: “And I only saved $4 out of the $20 savings. How’s that fair?”
The 10th man was OUTRAGED at their behavior.
So, the next night he didn’t show up for drinks The other 9 sat down and had beers without him.
But when it came time to pay the bill, they discovered the shocking truth —
Without the money from the 10th man (the richest) the rest of them didn’t have enough money between them to pay even close to half of the bill, because #10 had been paying more than 60% of the bar bill.
And that, boys and girls, journalists and college professors, Madam Speaker and Minority Leader, is how our American tax system works.
The people who pay the most taxes of course get the most benefit from a tax reduction, WITHOUT penalizing the less wealthy or the poor.
If you tax the wealthy too much, attack them for being wealthy, they just may not show up anymore. They may start drinking overseas, where the atmosphere is friendlier.
TODAY, Who pays How Much into the total “Tax Pool”?
REAL NUMBERS from LAST YEAR:
The 1% most wealthy paid 40% of ALL taxes collected in 2017
The 5% most wealthy paid 60% of ALL taxes collected in 2017
The 10% most wealthy paid 71% of all taxes collected in 2017
The 50% lowest income taxpayers paid LESS THAN 3%!
Why are we “concerned Americans” getting obsessed that the 50% lowest paid are “not getting their fair share” when taxes are reduced.
For those in Category #1 who “get it,” no explanation is needed.
For those in Category #2* who do not “get it,” no explanation is possible.
*For those in category #2, please re-read “Bar Room Economics,” above.
The author, Dr. Ronald R. Mueller, is the dean of the Home Business Tax-Savings Learning Center, located at www.HomeBusinessTaxSavings.com, and the author of “WINDFALL Tax-Savings APPROVED for Small-Business Owners” and the “2018 Tax Cuts & Jobs Act EXECUTIVE SUMMARY.” Both books are available from https://HomeBusinessTaxSavings.com During the past 20 years Dr. Mueller has taught tens of thousands of network marketers about home-business tax deductions and how to qualify for them. Subscribe to his FREE email alerts at www.TaxTipsYouCanBankOn.com
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