American Standard: Taxes Aren't Really Like Drinking Beer

by Benn Ray

It's that time in the election when relatives start sending around propagandistic, viral, emails.

Here's one I just got, and my response - just in case you get one similar.

First, here's the email I was sent:

Tax Lesson - Let's put TAX CUTS in terms everyone can understand.

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. '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 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 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 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 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 I!'

'That's true!!' shouted the seventh man. 'Why should he get $10 back when I got only two? 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 for drinks, so the nine sat down and had 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 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 where the atmosphere is somewhat friendlier.

David R. Kamerschen, Ph.D.
Professor of Economics
University of Georgia

For those who understand, no explanation is needed. For those who do not understand, no explanation is possible.

Here is my reply.
 
INTRODUCTION
I do have a functional understanding of economics, and I follow the writing and works of several economists regularly - my favorite (yes, I have a favorite economist) is Paul Krugman, but I also like Robert Reich quite a bit too. There are others I follow semi-regularly too, like economic reporter Barbara Ehrenreich, and I love Naomi Klein (her book The Shock Doctrine is one of the most revealing and relevant books I've read in a long time) . These are just a few of my favorites who usually have informed, smart and interesting things to say about our economy.

Now, before I get started, I just want  to point out that I took the time to read the whole email you sent me. I spent time thinking about it. And I spent even more time researching it. And I spent a lot of time constructing this reply. And while I don't expect a lengthy response from you, I would hope that you at least show me the same respect and read this whole email as opposed to seeing something you disagree with and trashing it out of hand.

VIRAL EMAILS
I find it somewhat alarming that you and a few other of our relatives like to take emails you get from strangers and forward them to people you know, regardless of the truth of these emails (and in the past, I have gotten in trouble for correcting "mistakes" in these emails and returning them to the recipients - but it is a policy I stand behind and continue up through this one).

For example, imagine if I started forwarding you emails from some Nigerian Prince who keeps asking for financial help. It's the same thing.

You don't know who the people creating this email REALLY are, and you don't know what they are REALLY after. So why pass their messages along to other people?

Case in point is this email you sent. This is what's called a "viral email" that has been sent around in some form or another since at least 2002. I've actually seen it before. No one really knows its origin, but the organization who created it is relying on people like you to help spread and propagate its ideas much in the same way people pass viruses along.

About this specific email - it is NOT who you think it is from.

-Contrary to Internet folklore, Dr. Kamerschen is NOT the author of this Tax Lesson email. Additionally, he does NOT know who wrote it.
 
-There is another version of this email that says it was written by T. Davies, a professor of the University of South Dakota. He too denies that he wrote it.

So, if the authorship of this particular email is in question, shouldn't the email itself come under the gaze of severe skepticism? Not only that, somewhere along the line, this email was fraudulently attributed to someone who denies writing it. So it is also a lie. You are forwarding email lies to people. Why would you do that? Well, because you're supposed to. That's what this email was designed to get you to do.

FUNDAMENTAL PERSPECTIVE DIFFERENCES ON TAXATION: COUNTRY FIRST VS. I GOT MINE, EFF YOU!
I imagine the reason you sent this email along is because it speaks a fundamental truth to your worldview (a fancy way of saying it says something that feels right to you - that you believe in). In this instance, I suspect you sent it to me because you think it nicely illustrates your view of tax structure and it somehow explains a very complex system in very simple terms (I find it talking down and mildly insulting, but that's just me).

I'm assuming that you find the idea that the wealthy should carry a higher tax burden fundamentally unfair. And you most likely know that I disagree with this.

Your view is much more individualistic while mine is based on the best interests of the country/community. As your candidate John McCain likes to say (which given his campaign's behavior is pretty ironic), "Country First". But then people like you don't actually understand what that really means.

I expect you think that people like me just want to feed off the much deserved success of the rich (after all they are just being rewarded by God and the American Dream for being smarter and working harder than those not as wealthy as them) and take their money and give it to the poor who clearly don't deserve it because they aren't as smart or work as hard because if they did, they'd be rich too.

It doesn't matter that there's no rational explanation why people would want to do that. Maybe you just think we're crazy. Maybe you just think that we have an irrational hatred of the rich and a love of the poor. Maybe that reveals more about how you look at the world than I do, but who knows.

My view is that not only have the rich not been paying their fair share in America (no capital gains tax on people who make money off of simply having money, no inheritance tax for the rich, years of pro-rich Bush tax cuts that have weakened us, an abundance of loopholes designed to help the wealthy avoid paying their fair share, etc. (For example, “Tax and accounting loopholes that largely benefit rich taxpayers and companies cost the U.S. government $20 billion a year even as the pay gap between chief executives and employees has widened.” )), but it is also necessary for those who have more to pay more. Why? Mostly because they can afford it. They can bear a greater tax burden than those who have less money.

I find it interesting that wealthy people who often identify themselves as Christian frequently look at taxation and wealth in this way: "A bunch of lazy liberals want to take our hard-earned and god-blessed money and give it to undeserving poor - the great seething unwashed heathen masses."

I'd just like to take this instance to remind you:
"Again I tell you, it is easier for a camel to squeeze through the eye of a needle than for a rich person to get into the kingdom of God." Matthew 19:24         

 Regardless, arbitrarily taking money from the rich and giving it indiscriminately to the poor is not anyone's goal. No one wants to break the rich and no one wants to give handouts to those who simply choose not to work. It's an overly-simplistic and ill-informed way of looking at the world - one that comes from a sour cocktail of ignorance and fear that is regularly blended by the folks who are responsible for the origin of the email that serves as the catalyst for this discussion.

BUSHENOMICS 101
And we are now seeing the fruits of 8 years of "Trickle Down" economic policy where tax cuts were given to the rich, deregulation was given to their businesses based on the failed theory that when the rich elite do better, so too does the country. If one positive thing can come out of our current economic collapse, it is hopefully that we can finally put away the myth of Trickle Down Economics (which is basically an institutionalized and systematic redistribution of wealth from the bottom to the top) - something you seem to dislike when it's redistributed from the top to the bottom.

Bush inherited a huge budget surplus and turned that into a gigantic budget deficit. Bush has doubled our national debt to $10 trillion dollars. Our economy is tanking due to the philosophies of free marketeers saying "don't regulate business and everything will be okay." And then Bush's response when the economy collapses is to take our tax money and bail out Wall Street (where firms are still giving million dollar bonuses to CEOS and $500,000 corporate retreats - the ones who you claim pay  $59 per beer in the analogy above) while my friends and neighbors who have done nothing wrong are on the verge of losing their homes.

I would think that anyone who voted for/supported Bush in two elections would at least have enough self-awareness to realize that they are in no position to say anything about taxation or economics.

There is also racist and classist FOX News/Republican talking point going around that you've probably already adopted (or if not, will soon) that blames the poor, minorities and Democrats for our current economic mess by saying these bad debts are due to Democrats forcing banks to give risky loans to minorities and the poor - and this is simply and demonstrably not true.

Over the past few years, I had been receiving credit cards in the mail that I hadn't asked for nor wanted (and I'm a white, middle-aged dude). I'd like to think that I was smart enough to know better and that's why I threw them away, but really, it was just a cynical instinct and luck. And even then, I thought I was the one behaving strangely - "Surely these economic institutions knew what they were doing, so maybe I should keep the cards. They're the experts, not me. It's their money..." (this was a result of credit market regulation relaxation allowing for more predatory lending practices as a result of the economic policies of the Republican controlled 3-branches of government).

3 years ago, I tried to buy a house. Seeing what's happened, I realize now that I couldn't afford it, but not a single damn person at the time told me that. Lenders, banks, all told me, "don't worry, you're good. There are a number of products that you qualify for, so we can get you the money." Experts who understood this business far better than I did, whose judgment I was relying on, were not telling me I was going to get in over my head. It was simply luck again that I didn't end up with a bad loan on a house that's now worth less than my mortgage. I was outbid on 3 contracts, and I simply gave up, heartbroken, believing I would never be able to be a homeowner - never to be a part of Bush's bogus Ownership Society. But man, I was lucky.

HOW STRONG ARE WE?
There is an idea I subscribe to that goes, "we are only as strong as the weakest among us." What this means is that when those at the bottom of our economic strata do better, so too does the top (an example of this is the Clinton Era. Sure you probably have an irrational hatred of him based on his fondness of blowjobs, but the Clinton '90s were a well-guided era of economic growth. And no, I don't agree with everything Clinton did - he dismantled welfare which I think creates a series of other problems, I don't like NAFTA, etc. - but EVERYONE did well. Under Bush, only a very small handful of people did well - and  the country is on the verge of collapse. One is a Democrat. One is a Republican. Democrats are far more economically responsible than Republicans - sorry, it's just a fact). It's not because we want to reward the lazy or undeserving with the riches of the wealthy. It's simply that we believe that when everyone does better, everyone does better. That that is a smarter way to move forward.

This is why we have so-called "entitlements" like public education. Not just because it's the right thing to do, but because it makes us a more productive and competitive nation. It makes our citizenry smarter. Believe me, I live in an area populated by a disproportionate number of dropouts - you do not want the uneducated to make up the majority of the population of America, or we are all doomed.

This is why I support social security and unemployment. Not just because it's the right thing to do, but because when the elderly have organized financial assistance, or when we have an economic safety net that helps those who suddenly lose their jobs, it helps keep these people from becoming a greater economic drain on our country and us individually.

And this is why I say that my perspective is more about putting my country first and yours is a selfish libertarian perspective with little foresight. Because I see investing in education, in health care, reinvesting in our decaying infrastructure (roads, bridges, phone lines, mass transit), all as something that will make America stronger and more competitive in the world and will make the country a better place for all of us. Sadly, it takes taxes to accomplish this.

You don't like this idea because you see yourself as a victim of the lazy poor - who want to take away what you and your family have worked hard for to give it to those who you think have not worked hard for it.

In fact, only 5% of the households in America make more than $157K a year. Only 1% of the country makes more than $348K a year.

And under Barack Obama's tax plan, if your household income is under $250,000 annually, you wouldn't see a tax increase.

Your idea that everyone should pay the same amount just isn't practical and would not generate enough tax revenue to help keep America strong.

Your attitude of screw everyone else, I'm just worried about me and mine (which is essentially what you are saying when you complain about a progressive taxation system) is exactly the opposite of my view of country and community, and invariably, your view will make the world a much more dangerous and unpleasant place for you and yours. How do I know this? Because the Bush Administration has basically enacted the taxation and economic practices you favor over the past eight years and our country is now in the most vulnerable, uncertain and dangerous place its been in since the Great Depression.

And as for a point by point dissection of the fraudulent viral email you sent me, I offer this.

Comments

[Katherine]

If I get this e-mail from my family (and I'm quietly giving thanks that it won't come from my immediate family) I'm going to save myself the time and frustration to point the sender over here. Because I could try to be thoughtful, but I think it would end with, "Grandpa, you're wrong. Love, your formerly favorite granddaughter"

[Benn]

The analogy is flawed in the first place.

All of these people of differing economic levels wouldn't be drinking at the same bar.

So the correct analogy to work with would be:
The first four men (the poorest) would be at a bar that charged $2 for a draft.
The fifth would be at a bar that charged $4.00
The sixth would be at a bar that charged $5.00
The seventh would own his own bar.
The eighth would own a beer distributor
The ninth would own a chain of bars.
The tenth man would own the beer company.

[Guadalupe]

Nice try. Your relative sent you a stupid email and your response was moronic. As far as I am concerned, anyone who argues that this financial crisis is the result of republicans is an ass and the same can be said of anyone who argues it was caused by democrats. Let me explain to you what is the most disgusting lesson learned from this financial crisis. I can't imagine any other problem facing our country that could be so easily evaluated to reveal a complete bipartisan fuck up as this. But you are typical of most in this country as you scurry to your respective side and blame the other side. If you thought 911 united us temporarilly, this mess should have joined us at the hip. The career politicians on both sides of the aisle are lauphing their asses off because as soon as the dust settles; their palms will be extended because there will be a whole new set of rules that will need to be bent.

[Amboy Dukes]

What I learned from Guadalupe's comment:

Guadalupe thinks anyone who isn't Guadalupe and who doesn't think like Guadalupe is:
"moronic" and "an ass".

Also, that government is corrupt and bad.

Hm. Who tends to have the perspective that "government is the problem?"

And typically, that sort of thinking leads to a deregulated business community and a dysfunctional government. And where does deregulated business and dysfunctional government lead us? Oh, right - right to where we are now.

OMG! Guadalupe is responsible for the economic crisis!

(And also the Republicans.)

[Guadalupe]

Amboy.
WHAT I LEARNED IN THIRD GRADE.

People who stereotype and hate large groups of people and assign societies problems to them with a broad brush are bad.

Corruption exists within all forms of government. Identifying what is corrupt within government does not imply you are anti-government.

Problem solving requires identifying the problem. I could list dozens of names and actions by democrats that indirectly contributed to this financial meltdown. But what would be the point? You (or I for that matter) could list dozens of names of republicans that indirectly contributed to this problem. That would degenerate into a third grade level; am not, are to, am not are to exchange.

If you do not address the fraudulent impact of lobbyists in D.C. and stop it, no bailout will work long term. The dust will settle with a new set of rules then the lobbyists will start bribing the system to favor their interests again regardless of long term consequences. Neither side of the aisle can resist the easy money. THAT'S HOW WE GOT HERE!!

[Amboy Dukes]

Guad, congrats on completing the 3rd grade!

As for Democrats being to blame for this crisis, are you thinking about floating the racist, classist, disproved and debunked 1995 Community Reinvestment Act argument?

I really hope so. That one is a lot of fun to rip apart.

And believe me, I understand that the Dems have their own flaws and fuckups (FISA vote, anyone? No impeachment hearings? WTF? Why the hell are we still in Iraq?).

But come on, we're talking about the self-branded party of accountability with the Republicans. The party that's been controlling all 4 branches of gov't (I like to count media as branch #4) for the past 8 years.

Now true, the Democrats got a majority in the house in 06, but they don't have a real majority in the Senate, and Republican Senators in this congress achieved record levels in obstructionism.

So to try and hang this hat on the powerless party is pretty much the same as blaming the economic crisis on the poor and minorities.

Don't worry, Guad, this time next year, I'm sure many people will be blaming every problem on the Democrats since they'll be in control of the Executive and Legislative branch. Right or wrong.

And I agree with you about the corrupting influence of lobbyists. You've heard of the K Street Project, right?

"a project by the Republican Party to pressure Washington lobbying firms to hire Republicans in top positions, and to reward loyal GOP lobbyists with access to influential officials. It was launched in 1995, by Republican strategist Grover Norquist and House majority leader Tom DeLay."

http://www.sourcewatch.org/index.php?title=K_Street_Project

[Guadalupe]

Amboy is probably the life of the party at the Socialist Party annual picnic. You are an example of why I refer to this site as a "shit infested fish bowl". You libs aren't so open to discussion that challenges your world view. You prefer to soak in the shit infested water and repeatedly agree with each others babbling hate mongering. Even if you found your perfect, socialist society to live in you would still find reasons to hate others. About half the country is more conservative than liberal in their politcal views, and vice versa. You've rationalized a way to hate half the country. What a great achievement.

[Amboy Dukes]

Guad, once again I compliment you on a well measured, even-handed, thought-out and impressively supported response to my points.

To which I say, me a socialist?

Your president just nationalized the banks.

We are all socialists now, comrade.

[Path]

And that... is the last word.