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cattails
10-01-2012, 03:00 PM
THE TAX SYSTEM EXPLAINED IN BEER



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 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 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 dollar 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

dollar 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



Cheers..!!!

CitizenBBN
10-01-2012, 04:18 PM
That's pretty good.

The only caveat is that now thanks to the Earned Income Tax Credit, which is just welfare hidden in the tax code b/c "welfare" became a dirty word, those 4 who didn't pay anything would in fact get paid to show up out of the 10th man's pocket.

Great post. Going to send this to some friends of mine. :)

cattails
10-01-2012, 10:45 PM
Sad part is it's true. Also posted in a nut shell, we in one hell of a mess.

jazyd
10-01-2012, 11:04 PM
Citizen, I know of some employers who have had employees turn down a raise because it would put them over the limit to get thei Earned INcome Tax Credit. Notice how the government does those radio spots telling people they need to apply for that credit and how easy it is and how much they can make. Surprised it doesn't have a trailor saying and you can get your free cell phone to call in to get your free money.*&*(^%^



That's pretty good.

The only caveat is that now thanks to the Earned Income Tax Credit, which is just welfare hidden in the tax code b/c "welfare" became a dirty word, those 4 who didn't pay anything would in fact get paid to show up out of the 10th man's pocket.

Great post. Going to send this to some friends of mine. :)

Doc
10-02-2012, 11:16 AM
A few things that need to be added

Bar owner decides they need appetizers so he gets them peanuts. Of course the cost of those peanuts is passed on in the same proportion as the beer means rich guy pays more. Poor guys decide the peanuts are not enough and vote to have nachos. Of course the guys at the low end who are paying for nothing vote yes on the nachos because it costs them nothing. After nachos, the guys want dessert and the majority vote yes on dessert because its not coming out of their pocket. Now they don't need dessert but they want dessert so majority rules. Then the bar tender offers hard liquor but the rich guy does not have the money to cover all the hard liquor so the bartender starts a tab and each week the tab goes up because the rich guy is sick of paying for the other guys beer, appetizers, dessert and hard liquor. As a result the guys paying nothing or only a small amount attack the rich guy for not paying his fair share. The accumulated bar tab hasn't been paid, all the beer drinkers die and the bill gets sent to the estate for the children of the beer drinkers to pay

cattails
10-02-2012, 02:26 PM
A few things that need to be added

Bar owner decides they need appetizers so he gets them peanuts. Of course the cost of those peanuts is passed on in the same proportion as the beer means rich guy pays more. Poor guys decide the peanuts are not enough and vote to have nachos. Of course the guys at the low end who are paying for nothing vote yes on the nachos because it costs them nothing. After nachos, the guys want dessert and the majority vote yes on dessert because its not coming out of their pocket. Now they don't need dessert but they want dessert so majority rules. Then the bar tender offers hard liquor but the rich guy does not have the money to cover all the hard liquor so the bartender starts a tab and each week the tab goes up because the rich guy is sick of paying for the other guys beer, appetizers, dessert and hard liquor. As a result the guys paying nothing or only a small amount attack the rich guy for not paying his fair share. The accumulated bar tab hasn't been paid, all the beer drinkers die and the bill gets sent to the estate for the children of the beer drinkers to pay


Good add on there Doc, sounds like the real world we are living in right now.

Lfbj00
10-02-2012, 03:24 PM
I just want to go with these guys and drink beer every day!!;)

Catonahottinroof
10-02-2012, 03:36 PM
Of course the rich guy is a Samuel Adams/Stella Artois kind of guy and the non payers are Sterling/PBR dudes. Such inequities exist in life :/

Catfan73
10-03-2012, 01:49 PM
That's pretty good stuff. What would happen if one of those guys started drinking his beer someplace else, like say the Cayman Islands? How much tax would he pay then would you reckon?

Sorry, I was getting bored. Apparently there are a few of these and they've been around for awhile, but no one seems to be willing to take credit for them.

CitizenBBN
10-03-2012, 07:01 PM
That's pretty good stuff. What would happen if one of those guys started drinking his beer someplace else, like say the Cayman Islands? How much tax would he pay then would you reckon?


The same amount unless he's committing a pile of felonies, which of course is the same as if he just avoided reporting income in the US.

Despite the propaganda, US residents and citizens pay income tax on their total worldwide income (even if it stays out of the country) unless they are a resident from a nation with a separate treaty with the US. Even residents have to pay, if they are in the US 183 days in 3 years. Even non-citizens are taxed on their global income whether it makes it to the US or not. So the rich in fact do not escape US taxes by moving money off shore, unless they move quasi permanently (roughly 500 out of 700 contiguous days) and renounce citizenship.

You can hide your beer abroad, but if the bartender at your US bar finds out you'll be kicked out into the street after he confiscates your wallet. ;)

Doc
10-03-2012, 07:10 PM
Of course the rich guy is a Samuel Adams/Stella Artois kind of guy and the non payers are Sterling/PBR dudes. Such inequities exist in life :/

So. He is the one paying. The others are just sucking off his productivity. Lifes a bitch, then you die. (Note: I suspect you agree with that).

Catonahottinroof
10-03-2012, 07:40 PM
So. He is the one paying. The others are just sucking off his productivity. Lifes a bitch, then you die. (Note: I suspect you agree with that).

You would be correct.

TonyRay
10-03-2012, 08:29 PM
635

Catfan73
10-03-2012, 09:33 PM
The same amount unless he's committing a pile of felonies, which of course is the same as if he just avoided reporting income in the US.

Despite the propaganda, US residents and citizens pay income tax on their total worldwide income (even if it stays out of the country) unless they are a resident from a nation with a separate treaty with the US. Even residents have to pay, if they are in the US 183 days in 3 years. Even non-citizens are taxed on their global income whether it makes it to the US or not. So the rich in fact do not escape US taxes by moving money off shore, unless they move quasi permanently (roughly 500 out of 700 contiguous days) and renounce citizenship.

You can hide your beer abroad, but if the bartender at your US bar finds out you'll be kicked out into the street after he confiscates your wallet. ;)

The government of the Cayman Islands generates most of its income from duties on imported goods. It charges 0 tax on income, profits, or capital gains.

It's probably not going to help the bartender much if one of his regulars takes his beer drinking to the Caribbean somewhere either.

CitizenBBN
10-03-2012, 10:29 PM
True if you're a Cayman Island citizen, but if you're a US citizen you still pay US taxes. So if our rich beer drinker went to the Caymans he'd still be buying the beer for the other guys at the bar whether he was at the bar or not.

cattails
10-03-2012, 11:02 PM
True if you're a Cayman Island citizen, but if you're a US citizen you still pay US taxes. So if our rich beer drinker went to the Caymans he'd still be buying the beer for the other guys at the bar whether he was at the bar or not.


Hard to teach the blind to see and the deaf to hear, good luck Chuck.

Catfan73
10-03-2012, 11:05 PM
True if you're a Cayman Island citizen, but if you're a US citizen you still pay US taxes. So if our rich beer drinker went to the Caymans he'd still be buying the beer for the other guys at the bar whether he was at the bar or not.

How does the bartender in the US know how much beer his buddy is drinking while in Grand Cayman?

CitizenBBN
10-03-2012, 11:42 PM
How does the bartender in the US know how much beer his buddy is drinking while in Grand Cayman?

It's a long list. I'm very close to a person who has a specialty in foreign taxation issues, so this isn't just theory. It's very difficult to sock away money abroad even if made there, and almost impossible if you make it in the US. Too much leverage against foreign banks who do business in the US, foreign companies with US ties, tax treaties, all sorts of things.

A biggie is that the price of underreporting income comes back to haunt you when you want a loan or need to make an investment in the US or something with US ties. Kinda funny to walk in with a suitcase full of cash.

This whole image of rich people socking away money outside the US and cheating us out of their tax dollars is largely bogus. I'm sure some do, but the image is very misleading, maybe a result of old foreign tax shelter deals that existed in the 80s. Those are gone.

the only people not paying taxes in this country are the 50% of Americans who don't get charged taxes and drug dealers.

No way around the analogy. That poor SOB paying the bar tab is being asked to fork more over, and that poor SOB isn't "rich", he's just a middle class guy trying to get ahead.

I do disagree w/ Doc and Hottin, he's drinking Miller Lite. He can't afford high end beer once he's done with the rest of the tab.

jazyd
10-04-2012, 12:23 AM
How much did it cost the guy paying for the beer for the wife of the president to go on vacation to a foreign country and take her friends? How much did it cost the beer drinker that paid for the wife of the president to run down to a local organic store to buy one stupid piece of organic herb when she could have sent one of 23 high paid assts, and having to have snipers on roofs, helicopter up? How much did it cost the paying beer drinker for the president to pretend to take a business trip to brazil for a week that just so happened to coincide with his daughters spring break? It cost the tax payers much more for these things than any amount of beer and the lost sales tax the beer drinker had while in the Caymans.



The government of the Cayman Islands generates most of its income from duties on imported goods. It charges 0 tax on income, profits, or capital gains.

It's probably not going to help the bartender much if one of his regulars takes his beer drinking to the Caribbean somewhere either.

Catfan73
10-04-2012, 08:29 AM
It's a long list. I'm very close to a person who has a specialty in foreign taxation issues, so this isn't just theory. It's very difficult to sock away money abroad even if made there, and almost impossible if you make it in the US. Too much leverage against foreign banks who do business in the US, foreign companies with US ties, tax treaties, all sorts of things.

A biggie is that the price of underreporting income comes back to haunt you when you want a loan or need to make an investment in the US or something with US ties. Kinda funny to walk in with a suitcase full of cash.

This whole image of rich people socking away money outside the US and cheating us out of their tax dollars is largely bogus. I'm sure some do, but the image is very misleading, maybe a result of old foreign tax shelter deals that existed in the 80s. Those are gone.

the only people not paying taxes in this country are the 50% of Americans who don't get charged taxes and drug dealers.

No way around the analogy. That poor SOB paying the bar tab is being asked to fork more over, and that poor SOB isn't "rich", he's just a middle class guy trying to get ahead.

I do disagree w/ Doc and Hottin, he's drinking Miller Lite. He can't afford high end beer once he's done with the rest of the tab.

Offshore financial centers have been coming under increased scrutiny and pressure, granted. It's only been in the last decade or so that the Cayman government has committed to regulatory reform however. Most corporations operate in tax havens in order to avoid taxes. That's pretty much the definition of a tax haven like the Cayman Islands. Not all of the money being deposited offshore is evading tax, but estimates are that there is between $21 and $32 trillion sheltered from taxes in tax havens worldwide. Think about how much money the US loses every year.

It's great for the bottom line for these corporations, but it's hypocritical for the officers of these companies to go around waving the American flag while operating in this manner imo.

Did it hurt the bartender's business when the guy that used to drink there left to do his drinking in the Caribbean? Without a doubt.

jazyd
10-04-2012, 09:45 AM
You are right it is great for the bottom line of corporations and it is great for all those that are retired or have their retiremnet money invested in IRA's, mutual funds or whatever in those companys so that those dividends are larger, the growth is larger and retirement funds grow, and retirement income continues to grow.
Much like Baine Capital where all you liberals complain, the retired teachers of Cal have over a billion invested withe them, all the Ivy League schools have billions invested in their endowment money with BC. They want BC to do very well, increase their growth and PROFIT. Like Obama you want to strangle profits so the government can strangle business and growth. Those monies have been off shore for years but your boy Obama has shipped billions off shore also, to a scandanavian country to build a car with our tax dollars, to Brazil to drill for oil offshore, which he won't allow here, so that we in turn can buy oil from Brazil. Obama won't allow a pipeline to bring oil from Canada but he wants to spend our tax dollars with Brazil to create jobs in Brazil, not here. He has said and is working on destroying and putting out of business the coal industry. You should see want poster blue has to say about Obama and the coal industry, blue should know because he is in it. How many jobs will we lose in Ky by losing the coal business? Think all those clean air companies Obama has spent $90 billion on are creating jobs?




Offshore financial centers have been coming under increased scrutiny and pressure, granted. It's only been in the last decade or so that the Cayman government has committed to regulatory reform however. Most corporations operate in tax havens in order to avoid taxes. That's pretty much the definition of a tax haven like the Cayman Islands. Not all of the money being deposited offshore is evading tax, but estimates are that there is between $21 and $32 trillion sheltered from taxes in tax havens worldwide. Think about how much money the US loses every year.

It's great for the bottom line for these corporations, but it's hypocritical for the officers of these companies to go around waving the American flag while operating in this manner imo.

Did it hurt the bartender's business when the guy that used to drink there left to do his drinking in the Caribbean? Without a doubt.

Catfan73
10-04-2012, 10:28 AM
So now you're against clean air and water???

Doc
10-04-2012, 10:52 AM
Its his money. He can put it in any bank he wants. If there are any tax issues as far as him "cheating", I'm 100% sure the IRS would have found it. Its not like he is Tim Geutner or Charlie Rangle, who are not subject to the tax laws and the punishments that accompany them. Its easy to say well he might have an account in some Caribbean island thus he is sheltering his money to not pay his taxes but perhaps something beside some anonymous source whispering something in Harry Reid's ear might be a bit more persuasive. The tax cheat conspiracy has no legs, has no evidence. Frankly its as stupid as the "birther conspiracy"

Doc
10-04-2012, 10:59 AM
So now you're against clean air and water???

Facepalm. Yeah, we are against clear air, clean water, we hate women, we push old people off the cliff, we want kids with autism to have no support, and don't even get me going on latino's.

Or maybe we are in favor of technology used to produce and burn coal in a clean manner :confused:

Catfan73
10-04-2012, 11:32 AM
"I don't know of any American president who has had a Swiss bank account." --Newt Gingrich

But Mitt Romney had, along with other interests in such tax havens as Bermuda and the Cayman Islands.

One example: a Bermuda-based entity called Sankaty High Yield Asset Investors Ltd., which has been described in securities filings as "a Bermuda corporation wholly owned by Mitt Romney." He set it up in 1997, and the day before he was inaugurated as Mass. governor he transferred it to his wife's newly created blind trust.

He subsequently failed to list this entity on several financial disclosures, even though it didn't qualify as an "excepted investment fund" that need not be on his disclosure forms. He finally included it on his 2010 tax return, but we still don't know what is actually in the company. The Romneys' spokespeople insist that they have paid all the taxes required by law, but investments in tax havens raise questions by their very nature because they're in jurisdictions where there is virtually no tax and virtually no compliance.

Another problem I have with him is that his campaign wants everyone to believe that he is a businessman who has created tens of thousands of jobs, but there are several cases where Bain bought companies, loaded them with debt, and paid itself extravagant fees, thereby bankrupting the companies and destroying tens of thousands of jobs.

With an estimated net worth possibly as high as $250 million, isn't it natural to wonder how he got it, how he invests it, and if he pays taxes on all of it? "One could be a fluke, perhaps done for show." --George Romney in 1967 when he released 12 years of tax returns just ahead of his presidential campaign, thereby setting a precedent that nearly every presidential candidate since has been subject to following. Wonder what he would think of his son's releasing only his 2010 return and an estimate for 2011? There are supposedly a full 55 pages in his 2010 return that are devoted to reporting his transactions with foreign entities. Jack Blum, Washington lawyer and expert on offshore tax havens and money laundering: "What Romney does not get is that this stuff is weird."

Catfan73
10-04-2012, 01:28 PM
It's a long list. I'm very close to a person who has a specialty in foreign taxation issues, so this isn't just theory. It's very difficult to sock away money abroad even if made there, and almost impossible if you make it in the US. Too much leverage against foreign banks who do business in the US, foreign companies with US ties, tax treaties, all sorts of things.

A biggie is that the price of underreporting income comes back to haunt you when you want a loan or need to make an investment in the US or something with US ties. Kinda funny to walk in with a suitcase full of cash.

This whole image of rich people socking away money outside the US and cheating us out of their tax dollars is largely bogus. I'm sure some do, but the image is very misleading, maybe a result of old foreign tax shelter deals that existed in the 80s. Those are gone.

the only people not paying taxes in this country are the 50% of Americans who don't get charged taxes and drug dealers.

No way around the analogy. That poor SOB paying the bar tab is being asked to fork more over, and that poor SOB isn't "rich", he's just a middle class guy trying to get ahead.

I do disagree w/ Doc and Hottin, he's drinking Miller Lite. He can't afford high end beer once he's done with the rest of the tab.

A confidentiality law in the Cayman Islands states that you can be jailed for up to 4 years for merely asking for information about the underlying assets in a fund based there.

Catonahottinroof
10-04-2012, 02:06 PM
So now you're against clean air and water???

Straw man much? Geez

TonyRay
10-04-2012, 03:44 PM
Straw man much? Geez
Well, at least he didn't play the race card.:p

Catfan73
10-04-2012, 06:33 PM
I was responding to something Jazy said. Maybe I misunderstood him, but he said something about Kentucky's coal industry losing jobs, which I took to mean that he thoughg that would be bad based on the surrounding subtext. He then contrasted the coal jobs statement with one about 'clean air' jobs, which logically means he prefers coal jobs to clean air jobs, ergo he prefers coal dust to clean air. Did no one else get that, or does everyone else feel the same way as Jazy?

dan_bgblue
10-04-2012, 09:17 PM
The electrical generation industry has spent billions of dollars in the last 30 years to comply with increasingly stringent air quality regulations handed down by the federal government at it's coal fired generation facilities. The current administration's EPA department is hell bent on having coal fired generation plants shuttered due to them implementing regulations that would be so costly to comply with that the companies could no longer remain solvent. This leads folks to believe there is a war on coal.

I am all for clean air as it keeps me alive. I am not sure that the boom in natural gas production, that is being used in converted generating facilities, is without environmental costs though, and those costs may be as hazardous to our long term health as are emissions from coal fired generating plants. Fracking is not completely benign in its usage in the natural gas fields, and natural gas (methane) is not exactly a carbon neutral source of energy. We do not see the EPA having fits about fracking nor burning natural gas in place of coal.

Geothermal, wind (which is becoming increasingly controversial due to weather pattern concerns around large wind farms) solar, hydroelectric, and nuclear are all alternatives, but none of them come close, even when added together, to meeting the needs of this nations thirst for electrical power. It would be wonderful if by 2020, 90% of all autos on the road were running on batteries. If that were the case, where would we get the electricity to recharge the batteries if we are relying on wind, solar, geothermal, hydro, and nuclear generating facilities? There are answers in the future and private corporations and university departments of engineering, physics, chemistry, biology etc are all working diligently to find a solution to power generation that we can all afford to purchase.

Forcing power generating companies to eschew the use of coal, putting a few thousand miners out of work, bankrupting coal producing companies and small business owners, banks etc that depend on those mining jobs to power the economies in the small towns of the mining areas seems like a harsh and misguided federal policy. I won't spend time talking about the downsides of the alternative methods of power generation, as I really do not want to take the time to do so. I also do not want to pay triple the going rate for electricity just so the Green Power Revolution brokers and middlemen can make trillions of dollars while I try to type this by candle light.

jazyd
10-04-2012, 09:30 PM
Right out of the liberal democrat spin book, almost to the word



So now you're against clean air and water???

Catfan73
10-04-2012, 09:54 PM
I have a very bad habit of oversimplifying things, sorry.

cattails
10-05-2012, 09:23 AM
The thing you have to understand about clean air is the the USA is such a small piece of land as you look at the earth as a whole. Not against clean air or clean water, but you have to understand that the fight for clean air is a losing battle. Do you really think China cares about this? Or other countries? We should try to do what we can within reason, when it is above and beyond the general good of the population then it is taken to far.