Our Tax System … Explained In Beer …
One of my team sent this to me, not sure who wrote it but thought you might enjoy it ... Thanks to Sam for sending it in ...
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, this 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.
For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible

Or they might find a quiet beach, watch the waves and give thanks that they don’t have to deal with insaneness of the system much longer. Brad, this should be economics 1.1! Thanks for breaking it down to the simplest form!
Brilliant Analogy Mr Sugars. It seems so obvious but the Politicians still sit around scratching their heads wondering why our best talent moves overseas.
…….. so you’re not headed home permanently anytime soon then Brad?
Amazingly graphic and simple, thanks again.
As a former tax consultant, I totally lost count of the number of people who have tried to tell me that the rich pay no or the lowest taxes – which is just absurd. How in the world can people hear that 3% of the population pays over 50% of the total tax and believe that they pay nothing or the lowest? This is a good demonstration of how it actually is.
So, if the bar owner would not have given the $20 ‘tax windfall’ they all would still be drinking happily at the bar?
:b
what would have happened if the bar owner would have raised his prices? Would the nine have worshiped the tenth man for paying so much more of the bill?
Great model Brad,
I’ll drink a beer with you any time. Maybe in two weeks in Australia. Especially since you typically buy the first round.
– Huff