How Our Tax System Works

Every day, 10 men go out for a beer and the bill 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 and the 10th man (the richest) would pay $59. So, that's what they decided to do.

The 10 men 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 would now cost just $80. The group still wanted to pay the way we pay our taxes so the bar owner suggested it would be fair to reduce each mans bill by a higher percentage the poorer he was, to follow the principle of the tax system they had been using.

And so the first four were unaffected. They still paid nothing. The fifth man also now paid nothing (100 per cent saving). The sixth now paid $2 instead of $3 (33 per cent saving), the seventh now paid $5 instead of $7 (29 per cent saving), the eighth now paid $9 instead of $12 (25 per cent saving), the ninth now paid $14 instead of $18 (22 per cent saving) and the 10th now paid $50 instead of $59 (15 per cent saving). Each of the paying six was better off than before.

But then the men began to compare their savings. "I only got a dollar out of the $20 saving," said the sixth man. He pointed to the 10th man, "But he got $9!" "Yeah, thats right", exclaimed the fifth man. "I only saved a dollar, too. It's unfair that he got 9 times more benefit than me!" "Thats true", shouted the seventh man. "Why should he get $9 back, when I got only $2? The wealthy get all the breaks". "Wait a minute", yelled the first four men in unison, "We didnt get anything at all. The tax system exploits the poor". So angry were the nine men that they surrounded the 10th and beat him up. The next night he didnt show up, so the nine had their beers without him.

But when it came time to pay the bill, they discovered they didn't have enough money between all of them for even half of the bill.

And there it is. That is how our tax system works.

contact: Bruce A. Peterson
2518th access Last modified: Mon 30 Oct 2023