How our tax system works

I get really tired of hearing about how tax cuts can be given to just the middle class or just the poor or how tax cuts disproportionately help the rich. In reality, our tax system does all of these things at once but can't do any of them individually. It is an essentially unfair system. To illustrate this, I saw a good example on a board. Below is the basic example of how our tax system works.

Suppose that every night, ten men go to their favorite sports pub. The tab for all ten comes to $100 for ten pitchers of beer. 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 $7.
• The eighth $12.
• The ninth $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 night 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 nightly tab by $20.”

(Here's your tax cut)

So, now drinks for the ten only cost $80. The group still wanted to pay their tab 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, the paying customers? How could they divvy up the $20 windfall so that everyone would get his ‘fair share’? The six men 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 beer! So, the bar owner suggested that it would be fair to reduce each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay. And so:

• The fifth man, like the first four, now paid nothing (100% savings).
• The sixth now paid $2 instead of $3 (33% savings).
• The seventh now paid $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 drunk and outside the bar, the men began to compare their savings.
“I only got a dollar out of the $20,” 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 dollar, too. It’s unfair that he got ten times more 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. The system exploits the poor!” The nine men surrounded the tenth and beat him up. The next night the tenth man didn’t show up at the bar, so the nine sat down and drank without him. But when it came time to pay the tab, they discovered something important. They didn’t have enough money between all of them for even half of the tab!

And that, to anyone who doesn't get that ANY tax cut or tax hike will ALWAYS disproportionately give more money back to the rich in total amount but ALWAYS give them a smaller cut than we get in percentage of income, is how our tax system works. So, go ahead and complain about your taxes and go ahead and ask for lower taxes. You deserve them, but don't expect anyone to deliver what is impossible under our current tax system. Taxing the rich and not you. Our government isn't Robin Hood and it is incapable of being Robin Hood.