"How Tax Cuts Work" by David R Kamerschen -REFUTED – The Real Way Tax Work Removing the Internet Garbage
There is a bogus viral email that you may notice floating through your email from time to time called “How Tax Cuts Work” by David R. Kamerschen, Professor. First, no one knows who really wrote this article or joke (below) Professor Kamerschen refutes the fact that he is the author. It was in fact originally circulated in 2001 or 2002 under the name of T. Davies.
The article is written in a way to make a political point about taxes. It hopes to present a truism with a simple analogy. In the simplicity of the analogy the truth is supposed to be revealed that it takes someone with money to pay for things and make expensive things affordable for the poor. (like Cake)
Below is the original story and below that is the way that tax systems would really work with this type of an analogy in a full political and economic system. The full system analogy is neither simple nor altruistic.
Now, this is a long bit of an article to read, but I promise you that it is interesting.
The ViralGrapeVine Guarantee
If you do not find it interesting, send me $5 for postage and handling along with a self addressed and stamped envelope and I will send you a dollar! You will then have $1 and an interesting story to tell about how you earned that dollar.
“How Tax Cuts Work” – the original viral email
Let’s put tax cuts in terms everyone can understand.
Suppose that every night, ten men go to their favorite bar for beer. The tab for all ten
comes to $100 for ten pitchers. 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.”
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, 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 to pick up the tab anymore.
David R. Kamerschen, Ph.D.
Distinguished Professor of Economics
536 Brooks Hall
University of Georgia
OK, so in that example you are treated like ‘boys and girls’ and offered up a simple analogy that any beer drinker could relate to and it is asserted by someone that would appear to know what they are talking about.
Its all bogus, including the lesson,
How Taxes Really Work
To start with . . . .
In the US and throughout most of the rest of the world, the tenth man would have paid off a politician for $10 to get a beer subsidy of $30 per night(to create jobs for the bartender). Of this $30, $10 of course would have covered the lobbying expense, $10 would go in his own pocket, $1 would go to the bartender to keep his mouth shut, and $9 would go to the bar.
The Bar would give him a kickback of $10 each night for bringing in his 9 buddies to make them into alcoholics, repeat customers for life.
The Bar would then raise their prices to $130 citing inflation and higher taxes.
The tenth richest man would then secure his finances in a Dutch Holding Company managed by a trust in Ireland which invests in Chase and Bank of America. He would then explain to his buddies that he is as poor as the rest of them and can’t afford to pay himself as he cries into his beer that night citing his latest financial report which shows him to be broke on paper so that he doesn’t have to pay taxes in the United States ever again.
Citing his former generosity, the other nine men would agree that the tenth man can now pay nothing like the 4 poorest.
The others would then be faced with an adjusted amount of
- The fifth would pay $3.
- The sixth would pay $10.
- The seventh would pay $22.
- The eighth would pay $38.
- The ninth would pay $57.
Now the group would recognize that this is not fair and so would lobby the Government for an Earned Drinking Credit for the Poorest men. The government would oblige and give the four poorest men $2 each, but they would tax the 5th – 9th men $2 each as well.
- 4 men receive a total of $8 and 5 men pay $10.
The adjusted amounts would then look like this for all 10
- First Receives $2 pays $2 | Net 0
- Second Receives $2 pays $2 | Net 0
- Third Receives $2 pays $2 | Net 0
- Fourth Receives $2 pays $2 | Net 0
- Fifth Pay $1 to bar pays $2 to tax | net paid $3
- Sixth Pay $8 to bar; pays $2 to tax | net paid $10
- Seventh Pay $20 to bar; pays $2 to tax | net paid $22
- Eighth Pay $36 to bar pays $2 to tax | net paid $38
- Ninth Pay $55 to bar; pays $2 to tax | net paid $57
- Tenth Man: Tax Credit Received: $30 ;
Pays $10 to politician;
$1 to bartender;
Receives $10 from Bar
Net RECEIVED $29 per night and free beerOf course this can not go on forever as the sixth, seventh, eighth and ninth men can’t afford to pay those rates forever. So they start paying with their credit cards held by Bank of America and Chase.
The tenth man would start demanding a higher Return on Investment from his investment managers, who would be hearing similar requests from all of their other investors. They would then expand their holdings into mortgaged back securities where a good deal more profit could be made.
Meanwhile the Fifth through ninth men are racking up debt on their credit cards from drinking every night, their health care costs are increasing as their liver fails, and they are also spending more on gasoline as they drink and drive as they can no longer afford to cab it.
Ultimately, they end up refinancing their credit cards into their house where they have equity. The mortgage broker promises them a 4.9% interest rate on the refinance which sounds good as their credit card interest rate is up to 21%. The broker promises them that they will not have to verify their income, provide W2′s nor copies of their tax paper work.
Their mortgage broker doesn’t tell them, but lies about the value of their house in order to refinance their credit and help them avoid paying private mortgage insurance. At their current income levels, and without verifying their income, their mortgage would be classified as Sub Prime and the interest rate would be 10.9%
The mortgage officer lies about their income levels as well to boost the internal credit scoring mechanism and get them financed, not at 4.9% but 5.9%, which is better than 10.9% and happens to pay the mortgage broker a higher commission than a loan at 4.9% that is not sub prime.
The mortgage broker also promises them a payment of $900 per month, but fails to mention the balloon payment of $50,000 in the 5th year and doesn’t mention the adjustable rates in year 3.
The men separately show up with a hangover and sun glasses on the date of their close for their new mortgages. They trust their broker and do not read the paperwork in detail flipping and signing almost as fast as they could raise a beer bottle to their lips.
The loan closes, the mortgage broker gets a fat commission, the bank securitizes the mortgages by selling them to an Irish Hedge Fund and pockets collectively a billion dollars in profits that year.
The hedge fund holds the investment for a year, shows a 35% gain on paper and starts selling shares to retirement funds and 401ks in the US that the Sixth through 9th men just happen to have the rest of their life savings sitting in.
The tenth man sees the writing on the wall, literally magic marker on a stall in the restroom of the bar.
“The end is Nigh”
He pulls his money out of the Irish Hedge fund invested in real estate and invests in Gold at $600 a troy ounce.
Meanwhile, he lobbies congress to tighten bankruptcy laws for credit cards which he still has a sizable investment in. Congress tightens bankruptcy laws and makes it impossible to absolve credit card debt, forcing people into chapter 13 where they must pay off the debt within 3 years or go to debtors prison where they can work it off in 7 years.
Gas prices are still going up so the President ignores a minor terrorist threat, allows the terrorists to blow up a major building and then goes to war with the terrorists home country where there is no oil, and simultaneously with a country that sits on 10% of the worlds oil reserves that has a decimated military infrastructure.
Oil prices shoot through the roof with Gold following close behind. The President whose family comes from oil barons make a fortune and become famous at their skull and bones country club outside of Yale.
Meanwhile our famous 10 guys, start paying even more money at the pump. The first 4 guys end up taking second jobs working at Wal-Mart and have to give up drinking at the bar so that they can try and beat their teenage kids out of a promotion.
The fifth and sixth guys get foreclosed upon. They were forced to stop paying their mortgage payments so that they could pay their mandatory credit card payments as required by the new bankruptcy law.
The seventh, eighth and ninth men all previously traded up their homes for McMansions that they can not afford with interest only payments of $2300 a month. When foreclosures start happening their plans on flipping their McMansions and cashing in on the equity slips through their fingers.
To make matters worse seven and eight get laid off from the companies they work for when their jobs get outsourced to China. The ninth man keeps his job at a law firm, but fails to notice that his 401k fund is slipping and has lost 10% in the last year. Things are looking up as his law firm seems on the edge of landing a big contract with Merrill Lynch.
Then the real estate crash and sub prime mortgage scandal erupt. Banks start dropping like flies to be saved not by the cash strapped government that can barely afford the war for oil any longer, but by China. Oil and Gold soar, Gold hits $900 a troy ounce and Oil hits $130 a barrel (about the same amount for 10 rounds of beer prior to the crash). Beer prices hold steady for the first few months, but then start to edge up as gas prices for delivery creep into the bar owners expenses.
Then the first four men one night remember their favorite bar. They sneak around back around 4:30 am and steal 50 empty kegs that just happen to be made of pure aluminum. Those kegs are now worth about half the value of a keg that is full in scrap metal prices or about $80.
They are not stupid and don’t want to get caught turning the kegs in at the dump where the police are already looking for keg thieves. So they head out to the closed down manufacturing plant where they used to work. They start a big fire, and melt down the aluminum into big messy aluminum splashes on the cement.
They turn in the aluminum for cash and get caught up on their back alimony and child support before heading back to work at Wal-mart where they now work for their teen age kids that beat them out for that promotion earlier in the month because their job skills weren’t as good as recent high school graduates. They then begin dreaming of new ways to find aluminum alimony allowances.
Meanwhile, the banks and mortgage companies lobby congress spending about $10,000 a head in an election year to bail out the economy. Congress provides the major banks with government backed loans to refinance the bad sub prime loans so that the government can personally guarantee those bad loans. They also put $100 billion of actual cash into the hands of Americans hoping to stimulate the economy.
Americans however, are all in debt up to their eye balls and use the extra $1200 they receive to make 2-3 credit card payments. They take the $300 for each kid and buy groceries for the month and then they start worrying about next month.
The banks get away free as they have Chinese financing now and no bad loans as they have refinanced them over to the US Government. The US government had to print more money to pay for all of these actions and so Gold goes up to $1500 a troy ounce.
The tenth man is now worth Billions and moves to Costa Rica to retire taking the new trophy wife that used to be the bartenders girl friend with him.
The first four men end up going to county prison for 3 months for stealing aluminum dog crap receptacles after running out of kegs to steal.
The fifth and sixth men end up living in an apartment and then homeless after they lose their jobs at Wal-Mart.
The ninth man ends up losing his entire retirement fund which took a big hit as the dollar rapidly plummeted into free fall. He ends up refinancing his own house under a government backed loan for $650,000. Unfortunately, a tornado comes through that winter in a freak coincidence and levels the home. FEMA promises to provide assistance but never shows up and the ninth man freezes to death attempting to salvage the shreds of his belongings. His home insurance policy refuses to pay as they claim that his house was over valued and then they prove it with comparables studies from his own mortgage brokers database.
The tenth man ends up dumping his new bride a year later, moving back to the states a year after that when the US appears to have hit rock bottom and he leads up a Chinese real estate investment initiative in the states. He makes another $10 billion in ten years, but is then executed in Beijing for espionage.
Meanwhile, the bar tender goes on to win American Idol and sleep with Paula Abdul. They are now blissfully happy, doped up on anti-psychotics, and the biggest two idiots the world has ever seen.
EDIT – Note this article is not written to refute the article titled ‘How Tax Cuts Work’ by David R Kamerschen. That is because David R Kamerschen refutes having ever written the original! This is just an article to expand on the concept of the original article written by an unknown viral writer.
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91 Responses to “"How Tax Cuts Work" by David R Kamerschen -REFUTED – The Real Way Tax Work Removing the Internet Garbage”
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[...] astute you may have noticed several unanswered questions that I did not mention in our article on How Taxes Really work for the sake of brevity. If by chance you do not like these questions or the answers to these [...]
Print Allowances…
Hi. Thanks for write this article…
Sometimes it really works the beer drinkers’ way. I paid income taxes of six figures last year and earned my paycheck by doing everything from driving a forklift to negotiating million dollar loans, Guess what? I quit yesterday – I’m not old enough to draw Social Security for a number of years but I can live off of savings and investments (wow, some of us do succeed by working instead of whining). Thanks for reading this – gotta get to bed, I have an early tee time tomorrow.
Um…is that supposed to be a refutation? The analogy is supposed to be making a simple point, in that in every ‘progressive tax’ system, any cut will probably benefit the rich the most, IF all you care about is absolute dollars.
All your protests to the contrary are just whining about irrelevant issues to that question and to the analogy. It is like the criminal defendant saying he should get away with murder because the DA is sleeping with another man’s wife. The analogy stands without any problem, and if what you are really trying to do is say that the so-called progressive tax is defendable, defend it, and stop trying to obfuscate the issues with all your red herrings.
I think the point of the analogy is that all the ‘irrelevant issues’ are all to often ‘very relevant’ and that no tax system ever operates in a clean un-tainted way. There are always many many things that subvert the system making the model so simplified that it is worthless.
[...] what am I expecting from a chain e-mail? I’m probably just overreacting. And apparently I’m not alone. Tax system explained in terms of beer – to make it more [...]
What a pathetic attempt at a response! You had absolutely NOTHING to refute the substance of the E-mail, which PERFECTLY illustrates the whining of the non tax paying class.
Jim is completely correct. Why can’t you refute the substance of this fake chain email?
Why do you even go to the trouble to try to refute the substance of this fake chain email if you are not going to do it? This is absolutely the worst public tax policy forum that I have ever visited, and you sure don’t know beans about how real tax payers feel.
Great response – I had a somewhat shorter one that I sent to a “no-matter-what-the-facts-are-I’m-going-to-remain-ignorant-and vote-for-an-old-white-Republican–who doesn’t-know-s**t-from-Shinola on-the-economy-war-mongering-deregulating-ill-tempered-liar-member-of-the-Keating Five friend of mine.
“But, instead of only looking at dollar amounts paid out or received at the bar, let’s look at what the percentage of income the bar bill was for each individual and their ability to pay. Even if the tenth and richest man paid more and received the least on the discount, his outlay is the smallest amount and percentage of total income/assets than all of the others combined, as their original breakdown indicates. This means, aside from the poorest, this affects him the least. Further, if one notices the gap between the richest and the second richest, the differential is more than the total of one through eight. This is an example of how those in the middle are more affected than either the bottom or the top; therefore it is the men #5 through nine who are being charged a greater percentage of income and receive a smaller dollar return, also a smaller percentage of income. As far as the guy getting beaten, that’s an object lesson in which the richest guy who has the where with all to buy all the beer all the time but acts as if he’s in the same financial condition as everyone else. The rich and corporation had better look out because the revolution is coming, so says that reactionary economist from Georgia.”
The original story -a parable, really – is short and simple and tells a story that folks who work and actually pay taxes can relate to in terms of the inequity of a progressive tax.
It is entertaining.
The refutation, however, is hilarious, well written, typical leftie crapola that flows from the minds of the “reality based” community, most of whom still live at home in their parent’s basement, sucking them dry as they age. But it was still funny.
However, the refuting author left out one key part of the ‘real story’ – and that is of the community organizer and union thug who each collect one dollar per night from the first 6 men to represent their interests. The first 4 (who cannot afford it) always pay anyway out of fear of having their knees broken homes razed, or of losing their factory job.
The 5th pays because his father and grandfather always did and the 6th pays as a team player hoping to someday move into the local chapter leadership.
All are happy until after they come out of the bar and are about to go home, whereupon they meet the organizer and union thug who hit them up for their nightly $1.
They are ecstatic over their discount and happily pay the fee. However, when the organizer and union thug find out about the discount, they take responsibility for earning the windfall and compel all 6 to pay an extra dollar. They also force man number 7 to pay up, saying he benefited from their actions, even if he’s not union and doesn’t live in the neighborhood.
When the first 7 men complain, the organizer and union rep incite the riot over the unfairness of the rebates to the richer patrons. Men 8 and 9, hoping to survive, join the others in beating up the 10th man.
The organizer later runs for office and claims to have had only a casual relationship with the union thug, who was “just some guy down the street” he knew and waved at.
Tom, you make a very good point and you are damn funny yourself. That said, you are also a braver person than I am and I won’t say anything bad about unions or organizers online. Those mean as bastards will hunt you down and cap you just to get a rise out of Bob Saget during the Leprechaun Song. Sleep well tonight, and keep some form of protection close.
lol just kidding, wish I’d thought of it myself.
Tom and Brettbum: you made my day!You guys are very funny
Touche!!!
Yeesh. Libs respond to basic logic with such tortuous ramblings. Such turgid prose usually betrays a complete lack of reason. It’s the hallmark of a jealous, unhappy person who can’t evolve enough to accept the inequalities of outcome in a free society. Just get it over with and move to a Socialist country where you’ll be “happy.”
Dear Themo,
We no longer need to move to be in a socialist country.
Taxman is right themo. you are living under the delusion that you live in a free, democratic and capitalistic society.
If you haven’t watched the news recently, you are in for a rude awakening.
Welcome to the New Socialist Republic of Bush.
BTW all comments are separately logged by the NSA in a nice little room in San Francisco. This logging process is completely separate and outside the control of this website. If you are looking for privacy or freedom, I suggest you consider moving to China.
I don’t know what there teaching you in school but every time the poor buy a car there tax are the same as the rich. There food tax there gas tax, cost of living, houses land, yes it may be on a smaller scale but just the same. There are a lot people that use the system to get free hand outs when they could be borrowing from banks some of the richest people in this country are doing it. Take farmers for one guess where there money comes from? right off the top of the food stamp programs…. They all have millions of dollars in new green tractors and drive nice new trucks live in large estates and take vacations. Our tax system in the usa is so over used by congress time and time again in many ways. At least the rich can afford to hire lawyers to lobby congress for what they want. All the people are hurting from the down slide of the United States from the decisions of the upper class and the effects are felt first on the poor. What would happen if the poor didn’t show up? I have never seen a rich person that was happy doing a poor mans job but it looks like that’s about to take place. If anyone wants to know where the $700 billion dollars should go then email [email protected] I think the rich would like the plan just as much.
Warren, Jom Tom et al:
Your attacks on the author, while energetic, are lacking in substance. You completely missed a very important point he’s making: WEALTH DISTORTS ANY ATTEMPT AT A JUST SYSTEM. Is that un-turgid enough for you? The fact is, as recently published, a huge percentage of American companies pay little or no tax, due to various schemes and loopholes which are not available to the average dude. I don’t know whether any of you are in the top .5% tax bracket, but if you’re below there, wise up: the rich guy has his hand in your wallet and you’d better check what he’s got up your #$#@. Our progressive tax system doesn’t compensate for a tenth of the money stolen by the rich. Their paid boys, Limbaugh, Hannity and O’Reilly, sure have fleeced you guys good. (Disclaimer: I’m a well paid professional who works his ass off every day, and am neither financially dependent on my parents nor living in their basement.) God bless all of us through the coming Depression.
StupidityReigneth,
Your name says it all. You are a Frggin IDIOT. Tell me, what number is on your Weather Underground Membership card? Typical loudmouth who wants to destroy the economy so that THEY can cash in on the ensuing revival.
And I am a member of the middle class who worked hard every day for 50 years, gave back to my community and paid to raise MY children. I made the hard choices in my working years and went without so that I could secure my autum finances.
You are obviously a far left LOON. People like you absolutly make me sick, when was the last time YOU gave back to YOUR community or country? How many KIDS is YOUR ex wife getting welfare for?
And lastly, don’t you DARE invoke the name of GOD you are self-righteous and obviously do not follow his tenants!
Hey Stumpy,
There’s no need to get so angry. Who ever StupidityReigneth is and what his beliefs are, he did not create this tax system, nor this financial system (which is extremely broken right now as I write this comment(10/15) and many months after I wrote the satire article above.
That said, let me offer up my own credentials for you to pick apart as you will.
I served in the US Army on active duty for 4 years. I enlisted during the build up for the first Iraq War and started the day the war kicked off in 1991. I kicked ass and took names in the military and was very good at my job.
That said, my family has seen people from every generation serve this country, and we can trace our roots back to the Mayflower and many other landing points in the country. We’ve fought and died for this country and spilled enough blood for it to fill the room, I’m sitting in as I type this comment.
That said, from my perspective, anyone is free to say whatever they like here on my site at anytime, because until martial law is laid down and our rights are completely tossed, this is still a free country in theory, and when it stops being a free country, you can bet your ass that my family will stand up and do something about it again.
I also happen to have a Master’s in International Tax Law on top of double majors in finance and accounting.
I am not an economist nor do I claim to be one, that’s a different bag of tricks and skills.
That said, the satire that I wrote in this article was designed to express points about the flaws in the system. I have witnessed many if not most of these flaws first hand.
The flaws do not make the system inherently bad from a left wing nor from a right wing perspective. Their just flaws, and if they can be fixed by man, woman, child or a martian, then more power to us all.
You should consider that in the comment you are attacking these flaws can and are used by foreign (non-american) based companies. I have seen (and turned over to the IRS and Justice Department) Chinese companies utilizing these loopholes to pay zero taxes in the US, pay zero taxes anywhere, steal American Intellectual Property, Produce black market knockoff goods with American brand names on them, sell them to terrorists in Iraq, who then used them to make improvised explosive devices and blow up my fellow soldiers serving our country.
This system is flawed and those flaws are being used against us. On this site, I am simply using satire to help people get interested and pay more attention. I utilize other forums to cover things more seriously, but each serves a purpose.
Personally, I do believe that a progressive tax system is the right way to go, but the system has definitely been subverted. Not because its progressive, but because politicians subvert everything they touch no matter what party they belong to.
Lastly, anyone that likes can offer up a blessing from God or any gods they like whenever they like. I do not believe in any of the religions of the world myself, but if someone wants to offer up good will to the rest of us, knock yourself out. Again, this is a free speech thing.
I find religion to be too closely married to politics, and would not necessarily mind if people stopped invoking their deity of choice, but if you have to do it, if it makes you feel better, if it makes someone else feel better,then no harm no foul.
But when self-righteous goofballs start telling other people when they can and when they cannot pick a deity, or offer up good will from their deity of choice, then you might as well be working for the Devil.
My family and I have helped pay for this country with our blood, sweat and tears. So don’t get up on a soap box and tell other people what the hell they can and cannot say.
You can take that kind of backwards ass attitude and move to Russia or the middle east where its more acceptable.
And thanks for reading the Viral Grape Vine!
I live in Ky and most of the farmers I know struggle every year to stay afloat. They certainly do not live in Estates and drive new trucks. As for the rich, if you work hard in this country you can become wealthy. Wealth is what drives most people to work hard. I personally started in a minimum wage job and through hard work and determination make more than 98% of the people in this world. When I grew up my house had a dirt floor and my Dad worked 70 hours a week to take care of his family. I be damned if I am going to let anyone raise my taxes so others can sit back and complain that the government doesn’t do enough for them. Damned socialist.
Joe Blow, things are twice as bad as you make them out to be.
Not only do crazy fools want to raise your taxes, but the taxes they are already collecting are not being managed well.
They are pissing away the taxes you pay now and want to take more money to piss away.
For what its worth, I work a whole lot more than 70 hours a week to take care of my own family. The way the economy is going, I suspect that 70 hour work weeks are going to look relatively easy before we get out of this mess and I don’t care if you earn or have more money now or not.
Money isn’t worth a damn thing when inflation kicks in to high gear.
HYSTERICAL!!! but i have to run. no time for a real comment and you better believe i had one. it was a good one too, darn these insane clients! darn them and their money to all mighty hell!!!! lol
[...] nevermind the fact that the professor listed didn’t write it, and it can be economically be refuted. None of this hits the point of the matter. Point is, my Dad and four or five other people we [...]
I stopped reading your response around the point where you assumed one in every 10 people can buy off politicians or has a lobbyist. So yeah, I stopped after the first sentence as clearly your rebuttal is as fictional as the original story.
The point from both are clear, though the point of the second I believe escaped its author. The original story is much more concise than what you wrote. Given its length, I assume it was fueled by a fascination with your humor and wit which seems to be enough to impress you.
A fair system of taxation…the notion appears to presume that what is being funded by the taxes is inherently fair. With Amerika increasingly converting to a full-fledged socialist people’s republic since the early 20th century, I wish that more people would question the fairness of it all. Sure, lowbrows blame Bush. In doing so, they ignore “bipartisan support” for every single budget that passes the republicratic Congress and executive branch. But that’s just at the federal level.
If you track every single tax, fee, toll, assessment, etc that you pay to the government at all levels, I believe state and local revenuers extract far more from Average Joe than the feds. What’s supported at the federal level by all of this tax collection (at the threat of imprisonment and/or private property confiscation) includes the war machine, followed by welfare institutions like Healthcare, Retirement, Housing, Education, Agriculture, etc (including the upper echelons of the financial system, apparently), with identical socialist institutions at the state level (but without the war machine and bold transfers of wealth to bankers and stockholders). Yet we have no money for bridge maintenance and criminals run free because we can’t afford prisons and caning was banned as inhumane (not surprisingly, around the same time that socialism took hold of the country).
But I digress…
Setting aside government intervention in the financial sector (though socialists ought to be happy with that perfectly predictable development, too), these vast expenditures for socialist causes are fair ONLY if you are a socialist. They are ONLY inherently governmental functions because socialists believe that’s the case. If you’re an enemy of socialism, however, and recognize it for the demonstrated failure that it is when used in gigantic, multicultural empires, then no system of taxation that supports socialism will EVER be fair. To folks like me, taxation to support socialism is positively treasonous in a nation founded on liberty.
“Federal aid [when times are tough] encourages the expectation of paternal care on the part of the Government and weakens the sturdiness of our national character. . . . ” Grover Cleveland
Inflation is the refusal of the rich to be anything but richer. The current version of capitalism is nothing more than a huge pyramid scheme, and we should have just let the whole thing naturally collapse like all pyramid schemes eventually do. 80% of the “un-educated” “people” clearly understood this, and were against “The Bailout” according to the polls, and were willing to take their chances on chaos, as long as the greedy thieves got what they deserved. Sorry gentlemen, with all your intellectual analysis, you cant buy average Joe street-smarts. The man on the street knows what went down, even as you all try to deny it. As Buffett says, when the tide rolls out we get to see who’s been swimming naked.
Funny how all you free market kool-aid drinkers wont see the justice in making the rich pay for their excesses the same as the middle-class fools who lost their McMansions and Hummers when their Helocs maxed out and the baloons came due at 11%. Oh, and the re-financiers left town until the next tide rolls in.
But dont worry, guys. It’ll all work out. Or not! Trust me…there is a God! She’s not a leftie or a rightie…she’s an eco-terrorist and if you dont start respecting the rest of humanity shes a-comin’ to get ya!
So here I thought I would be reading an article which refutes the original e-mail. What I found was a bunch of stereotypical Internet vitriol which does nothing but showcase the author’s ignorance of the topic. Perhaps in the future when you claim something has been “refuted”, it would be in your best interests to actually make an attempt to do so.
Thanks for your comment General Concernicus.
The word REFUTE is in the title to indicate that esteemed Professor David R Kamerschen ‘REFUTES’ writing the original article.
This article is not a refutation of the original article at all. It is not an acceptance of the original internet vitriol, but an expansion of that internet vitriol. A celebration of the vitriol that is spread virally through the internet. It is a perfect fit and example for ViralGrapeVine.com, which is mostly populated by similar vitriolic humor, satire, and complete and utter bullshit.
The analogy fails to mention that the 10th man drinks 95% of the beer.
You are right Trig. That’s the most glaring omission that anyone has called to my attention yet. I’d like to also point out that you are a very astute baby, and I hope you are enjoying your time breastfeeding!
Nice article. Very witty. But I’m not sure that it refutes the original simplistic example so much as it reinforces it.
It seems to me that the basic theme behind both is that when the government takes wealth by force from it’s citizens and attempts to redistribute it in a method that some few have determined to be fair, it is bound to fail. The rich will use their influence to protect their wealth and amass more loot from the enlarged government coffers. The poor will be manipulated by being promised loot, but suffer all the more in the end. The guys in the middle will end up being stripped of their hard-earned wealth and become the poor.
Then, we will all be serfs offering the fruits of our labor up to the rich man and the government he runs instead of choosing how to distribute it ourselves through a free market. It seems to me that the best way to prevent this is to keep the government out of the wealth redistribution business altogethor. Then, the rich man is not motivated to exert ever more influence over the government, the guys in the middle can keep their hard-earned wealth, and the poor can maintain their self-respect and have a better a opportunity to move up without becoming pawns of the powered interests.
I’d agree with you on several points Chance. The government definitely does not help, runs us in to unintended consequences and generally screws things up significantly.
The problem is that the government has already cooked up a crooked system, so you just can’t let the status quo go. So then what do you do?
Cynical and bitter, eh? Didn’t get picked for kickball team as a kid? The man holding you down? This is silly conspiracy theory. Sure, wealthy manage their money, but the fact is that the top 1% pay 40% of all of the taxes. Are they really so good at getting away with something or are you just bitter someone has more money than you?
NotSoBitter thanks for reading and actually this site is written by my secretary, whom I dictate comments to from my yacht off the coast of Southern France.
I think you are missing the point here. This has nothing to do with rich v. poor. In the original article, it attempts to pit classes against each other and then show the poor that the benevolent rich people are really footing the bill for the poor people.
How nice that is. But its also nonsense from the perspective that society functions as a system with all characters playing a part. The system is very corrupt and extremely inefficient, but it is (as of 10/27/08) still functioning(just barely as of 10/27/08 11:59 pm est).
Keep thinking about taxes in the form of sports analogies and we as a country will keep electing complete morons into every level of government until we all find our selves living in an Idiocracy and not a democracy.
So, your take on the original email is –
” In the simplicity of the analogy the truth is supposed to be revealed that it takes someone with money to pay for things and make expensive things affordable for the poor. (like Cake)”.
I thought the original email was to explain to people that punishing productive people in society will quickly convince them to quit providing goods, services, and jobs.
But what do I know. I’m not a tax accountant, don’t have double degrees, can’t really afford to pay for an expensive tax accountant let alone a lobbying firm.
But I can read.
Sally
Thanks Sally and congratulations! Those things will typically get in the way of understanding that 1 this is a joke and 2 although Ayn Rand makes for some very interesting and fun philosophy, its just philosophy and doesn’t play out in the real world, because people that do produce stuff don’t have the balls to really go on strike. (probably in part do to their proclivity to go do stuff as opposed to sitting around striking all day).
You could be right that some fluffed up lobbying firm may have been behind the original article, but I suspect it was some pissed off grad student trying to get even with Dr Kamerschen by incorrectly attributing his name to this.
Now, all that said, this is much like a rorshach test and you will get out of it what ever you want to, which might even include a feeling of insult when you scroll through 34 comments and read my response to a comment attack. For that I do apologize, but I never intended to insult you by talking to someone else.
Oh, and by the way, the other point is that the tax system really doesn’t work very well at all, but I don’t need to tell you that. It sure doesn’t require any degree to figure that out! (I just saved you $50k and a lot of time and money, please use that productively.)
You should have stayed focused on what the original email said. It was talking about what someone paid at that time. You might have simply mentioned the percentage of income each beer would cost each person.
I really like these next few sentences you wrote saying all of those guys were dumb. This is the problem going on right now in the housing crisis. The poor people didn’t read what they were signing, but they were happy to get homes they couldn’t afford. It might not apply to everyone, but when the bank wanted to give me a loan of 1 1/2 times what I thought I could pay, I said NO! When they wanted to give me an adjustable rate, I said no. You should not be buying a house if you don’t understand that “adjustable” means that the interest rate can go up as well as down.
“The men separately show up with a hangover and sun glasses on the date of their close for their new mortgages. They trust their broker and do not read the paperwork in detail flipping and signing almost as fast as they could raise a beer bottle to their lips.”
It’s really a very simple issue. The corporations and wealthy people do have a lot of money and they spend it too. They should pay taxes for their yachts, houses, etc and they do. The corporations should pay taxes on what they buy. The homeless man should pay taxes on the wine he buys. I pay taxes on what I buy and I think that is the whole issue. We should move into a flat tax system. Increase sales tax if necessary. Pay more taxes for luxury items. That’s fine, but to give stimulus checks to people who don’t pay taxes? That’s simply ridiculous!
Hey Dave,
Thanks for the words and the critique.
btw this section
“The men separately show up with a hangover and sun glasses on the date of their close for their new mortgages. They trust their broker and do not read the paperwork in detail flipping and signing almost as fast as they could raise a beer bottle to their lips.”
Is actually very real and the brokers cooking up the loan documents increasing the reported income levels to get the loan closed and the borrowers not catching the fact that the income level listed was inflated, resulting in loan fraud when they put their own signature to it.
Those things did happen and have been covered very well in the press.
Systematically, the banks backed by their investors were just as dumb as the borrowers at the other end of the equation. I do not see this as a problem resting solely on the shoulders of the borrowers that borrowed too much (I was offered a mortgage myself twice as big as I needed and 1/5 times what I could afford and turned it down, but not everyone did.)
The banks could have protected their companies, stockholders and mortgage backed securities customers better by actually doing some due diligence in the underwriting stage and they could have instituted better controls as well.
The investors could have also done a better job of demanding more transparency and refusing to by or invest in garbage.
The thing is with the mortgage crisis it is hard to find any group that did not share substantially in the blame. That means that we all need to share substantially in the cleanup. So far that has not happened and that is a major signal that the worst has not yet come.
While somewhat entertaining to some, I’m sure. The ‘refute’ is far less plausible, realistic, or a simulation of real life than the original analogy.
hey Shaver,
The ‘refute’ is there to indicate that Kamerschen refutes having ever written this. Its not a refutation that the analogy is correct or incorrect.
What has not been questioned here (at least not that I have seen in my briefing of the replies) is why the first 4 men pay no taxes. Is it because they choose not to make use of the free education that our taxpayers provide, therefore they cannot get a decent paying job? Perhaps they choose not to work because they can get by on the handouts that our provided through the government that takes money from those who have more…maybe more ambition, more drive, more education because they took advantage of the student loan system. Why should they make more when they have grown content enough with their situation to merely exist with what they are given, and they are allowed to vote for people who promise to give them even more….and they don’t even have to lift a finger after leaving the voting booth. I have lost almost everything due to a bankruptcy, but I have earned it all back by hard work and perseverence. I have been behind people in lines buying individual soft drinks and bags of chips at a convenience store, paying with food stamps, while I would take that same amount of money to a grocery store and buy dinner ingredients enough for the week and still have enough to buy a 2 liter soda and a large bag of no name chips with the leftover money…if I wanted to. The problem is that we are all arguing over who should pay when we should be trying to solve the problem of why four people out of ten don’t make enough money to pay any taxes at all.
Magnificent point Frustrated!
I agree entirely. In the article, it is supposed to resonate with the ‘existing’ system and in the existing system many people do not pay taxes at both ends of the spectrum (the richest and the poorest).
That said, I personally would prefer to start the focus on the people that have the potential but have not realized it yet, while simultaneously improving the system to crack down on the people and companies avoiding taxation (a crime) but doing it none the less because the IRS does not have the resources to track down people that avoid taxes. I say this as a former IRS whistle blower myself, who watched a company fleece both the US and the government of China(hong kong) for millions of dollars in taxes and the IRS didn’t have the resources to do anything about it.
No wonder the economy is in such deep s–t, if there are such Professors of Economics.
He has big problems with arithmetics to let him even come close to students.
Forget about explaining anything about economics!
See yourself.
Total payment after reduction (discount) must be $80, but, if you add together
all new individual payments from the article, you’ll get only $79 ($79 = $2+$5+$9+$14+$49) !
In addition to the incorrect total amount, new individual amounts are wrong as well:
+—————————————————-+
| | Ind. |Reduction|Rounded| |After amounts|
|Before|Factor| Amount | Amount|After |from artickle|
|——+——+———+——-+——+————-|
| $1 | 0.01 | -$0.20 | $0| $1| $0 |
| $3 | 0.03 | -$0.60 | -$1| $2| $2 |
| $7 | 0.07 | -$1.40 | -$1| $6| $5 |
| $12 | 0.12 | -$2.40 | -$2| $10| $9 |
| $18 | 0.18 | -$3.60 | -$4| $14| $14 |
| $59 | 0.59 | -$11.80 | -$12| $47| $49 |
|——+——+———+——-+——+————-|
| $100 | 1.00 | -$20.00 | -$20| $80| $79 |
+—————————————————-+
No mater what loop holes the rich have it doesn’t change the fact that the IRS reported the top 25% earned 66% of the income but paid 85% of the tax bill and the bottom 50% earned 13% of the income and paid 3% of the bill. That leaves 12% of the bill to be paid by last 25%. Someone going to have one hell of a time convincing me that the rich don’t pay there far share.
Well, it’s quite philosophicall…
. Rich pay for their peace of mind and overall safety, unless you like revolutions and deal with all they bring…
Tax payments are – not exactly, of course, I know, but similar to certain degree – like premium payments for global, country wide insurance (with state acting as a provider). And as any insurance mechanism it’s spreading money/resources over all participants (with lots of money stick to whoever is in charge and in control). Still I can ask, why, if I am healthy, I have to pay for those who eat junk food, smoke, etc. and then have high medical bills? Or why rates for my car insurance only go up, if I don’t have any accidents and violations for decades? There is no fairness in this world. It is created with a “bug” by design, so don’t expect much
But you didn’t tell me where to send the $5
[...] Back in this thread, we saw a long post comparing the way the tax code works to ten men drinking in a bar. While I thought it was overly simplistic, it turns out the story’s even better. Not only is it simplistic, it’s a hoax. [...]
@AWMC That’s all well and good in percentage terms, but that doesn’t mean that ‘the rich’ are complying with the law as the IRS doesn’t have the resources to insure that they do.
@Osten-Baker very good point, kind of. taxes do keep things steady enough to prevent revolutions, but then again, the US got by for about 140 years without an income tax, and only encountered one (failed) revolution during that time period and it wasn’t about keeping the rich safe from the poor, but keeping the rich in control of their economic base.
@TPB Just tip your bartender an extra $5 next time you get a chance and tell them this is for the VGV. The Bar Tenders For More Drinkers and Lower Taxes commissioned this article and all proceeds are filtered (laundered) through them.
Brettbum if I’m hearing you correctly are you saying that 75% of Americans don’t cheat on there taxes, and it’s only the evil rich that are doing the cheating. If that’s your thinking I’d have to say BS. I’m sure you and everyone else that’s reading this myself included know a lot of people that aren’t in the top 25% that hire tax prepares or do them on there own and take deduction that they shouldn’t be taking. So let me ask this question have you ever cheated on your taxes no mater the dollar amount? If you have ,you have no right to complain, you’re just as guilty. And if the IRS has a problem with the rich using the law other then they intended maybe they should get the law changed.
As far as the IRS not having the resources, it would appear to me the IRS would have a better change at policing the top 25%, and if “the rich” are the only ones not following the tax laws as you have suggested there should be no reason for the IRS to even be looking at the rest of us. So why doesn’t the IRS do that? For starters the rich are not the only ones not following the tax laws. Two the rich have spend a lot of time and money on lawyers and accountants making sure that if they do get audited they’ll win. And three the IRS looks at the rest of us as vary easy targets because one we don’t have the money to fight them. Two most of us would rather just get it over with and move on.
“Government does not tax to get the money it needs; government always finds a need for the money it gets.” Ronald Reagan