Taxes and beer

[Trevor Little (Trevturtle) - Treasurer]

Not my words... but an interesting analogy for taxes, using beer. 

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For those of you reciting the 'Tories defend the rich' argument, read this. It's worth it, I assure you.

 

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 realised 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 pound 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 pound 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.

 

[TAFKARM]

The most sensible thing I’ve read on the forum!

 

[Kingster]

Not sure this is how our UK taxes work as this is based an American tax system from the turn of the millennia when Bush was wanting to drop taxes by 20% (ref Snopes) - good parable though 😁

 

I reckon in our version, Comrade JC would increase bar tariff by 20% with 9 & 10 taking the hit and then redistribute that so that the first 8 pay nothing. Won’t be long before 10 goes to another bar and then the others look to 9 to foot the bill - he can’t and the bar goes bust. 

[Kingster]

By the way. I’ve never voted Tory and  probably never will. My leanings are more left of centre coming from a very working class background, but running a business of my own means I also appreciate the more business centric views of the right of centre.

 

But there’s no way in hell I’ll ever vote for JC - so who gets my vote?

Absolutely no idea!

[Alan France]

1 hour ago, Chris King - Webmaster and Joint North East AO said:

By the way. I’ve never voted Tory and  probably never will. My leanings are more left of centre coming from a very working class background, but running a business of my own means I also appreciate the more business centric views of the right of centre.

 

But there’s no way in hell I’ll ever vote for JC - so who gets my vote?

Absolutely no idea!

Boris, he’s not really as right wing as people think.

[Blatman]

1 hour ago, Chris King - Webmaster and Joint North East AO said:

By the way. I’ve never voted Tory and  probably never will. My leanings are more left of centre coming from a very working class background, but running a business of my own means I also appreciate the more business centric views of the right of centre.

 

For discussion. I'm not trying to argue with or insult anyone...

 

Working class people want something "better". They decide to haul themselves up by pursuing better education and better employment and ultimately working for or owning and running successful businesses. And then vote Labour because of working class "tradition". I don't understand that at all.

 

There are many who would like to improve their lot by becoming business owners or being promoted to such positions but lack drive or ambition or enough education to do so. BUT drive and ambition also require an environment that will help foster them. The Tories generally initiate policy that favours business. EVERYONE who works, be they CEO or tea boy should recognise that if the business has more money left after tax, business rates and all the other expenses of running a business (and they are extensive) then they should all benefit in some way with improved salaries or improved working conditions or bonuses or "something". The problem, as I see it, is that many business owners see the extra profit as theirs and do not share equally with their employees. Some keep it. Some re-invest in the business which is good but most people don't see this as a benefit to them which is a shame. What we want is a bit more money in our pocket. Re-investing in new computers and office chairs is nice but it doesn't help with this months mortgage payments. But I digress...

It is then a simple leap to the argument that the Tories make policies to line the pockets of the fat cats whilst ignoring the "poor". I say the policies are sound, it's the Board of Directors that need a little education. But it's their train set. They can play with it any way they want and they can take it home with them if they want. Yes the "trickle down of wealth" which is often bandied about does work but often not in the immediate way we would hope. I am sure the hope is that we all immediately have an extra few quid in our pockets. It just doesn't work like that and it has nothing to do with Government business policy.

 

The Labour Party jump on the "Tories favour the rich" because they know that there are millions of people who still believe in the class system and who think of themselves as the "working class" and Labour play in to that. They also go after minorities for the same reasoning. Get enough small groups under the same banner and suddenly it's a big group (Instinction Rebellion for example). But whilst they are under the same banner they aren't all looking in the same direction and that's a problem when power is granted.

Labour policy seems to me to be that if the companies can't behave "responsibly" towards their employees then they will do it by imposing more tax and spending the revenue on "everybody" in the guise of "improved public services that benefit everybody". The trouble is that most workers don't consume a great deal of public service (I am excluding the NHS here which is sacrosanct) and many of the services thought of as public are in fact private, like buses and trains, gas, electricity and water, and even more are locally funded by council tax like libraries, refuse collection, road repairs and so forth. 

So with Labour the workers still don't get pay rises or bonuses or improved conditions because the company can't afford it because of the tax burden. The beneficiaries of the improved public service funding is perceived as benefiting only those without jobs (yes they need help and I am not saying we should not help those less fortunate than us) and this creates an imagined imbalance where we hear every day that "I'd be better off on the dole". This is not true of course but the perception is exactly that. With a Labour government if staff were to leave a job to start their own business in order to improve their lot, the tax burden is a real obstacle should they begin to become even moderately successful. And as soon as anyone is even slightly "successful" there are plenty who see the head of a small business as "millionaires" and immediately label them as fat cats just because they see them in a nice Audi or BMW (probably leased) and wear a suit to work. 

 

I can't help with the question of who to vote for. I struggle with Labour because of the simple fact that Corbyn is the most left wing leader of a party that we have seen for a long time. Nationalising anything that has been privatised would cost billions and would likely drive service levels back to the 60's. Beeching anybody? And nationalising broadband is a thin and somewhat laughable attempt at vote grabbing. He may well have said free PG Tips for everyone. Decimating ANY multi-billion pound industry just because you can and you have a parliamentary majority is not a good idea and anyone who can't see that should not be allowed to vote! That said, the promise of "taking back control of [insert industry name here]" would undoubtedly get shelved after a commission investigating the feasibility of nationalising [insert industry name here] found out that we can't afford it anyway, so the revenue raised from more tax is spent on feasibility studies that tell us the bleeding obvious and nothing changes except that all the money has gone to politicians, their cronies in quango's, and government appointed accountants/lawyers/Judges who ran the feasibility study. So who is benefitting from Labour policies? Politicians, their cronies in quango's, and government appointed accountants/lawyers/Judges. The same is true for the Tories of course it's just that Labour seem to be able to get away with it, at least to my eyes.

 

The Lib Dems are just a joke. The party with Democrats in the name wants to revoke something the majority voted for. Dumb. But they will pick up votes from disgruntled Labour supporters who due to "tradition" can't bring themselves to vote Tory. This is common and never changes anything. The best chance they had was the coalition with the Tories and look how that turned out. The one thing the Lib-Dems crusaded on, their line in the sand was an end to tuition fees. They did not deliver. Even "in Government" they didn't have the clout or the political will or couldn't fudge the numbers enough to deliver. They're just weak.

 

The Tories I think have some forward thinking. They won't tax us back to the stone age. They privatised lots of industry and they're sticking by that decision. Reducing the tax burden for those who benefit the most is a great idea. If we have more to spend then we tend to spend it and when we do, VAT is poured back in to the government coffers so revenue is not lost but we can buy the things we want that provides the dopamine rush that makes us feel our lives are better.

In general the standard of living in the UK is much higher now than when I was born in the 60's. How much of this is down to the various policies of the various governments is debatable of course but for most of my life the most significant changes that have made a difference to MY life have been made by the Tories. And I think if an honest review of general prosperity and quality of life was made based on the last 30 to 40 years I believe that the more right wing policies are the ones that show real results for the majority of the population the majority of the time.

 

The below clip from "The west Wing" whilst USA-centric, at least shares a principal. The top x percent of UK earners likely pay for a significant proportion OF the UK government in tax, so, as Sam says, lets not call them names while they do it. Cos if we tax them to the point where they take their money somewhere else, who pays then?

 

 

 

 

[Alan France]

If you think Broadband is expensive now, just see how much it will cost when it’s free!

[Man On The Clapham Omnibus]

An Austrian gentleman named Rudi I once worked with left Austria in the late 1930s (guess why!) and he said "Ze most expenzive vay is free of charge!" 😵

[DonPeffers]

The humorous Taxes and beer analogy doesn't work in the real world as even the poorest will pay 20% VAT on non-food purchases so not paying zero tax. Also anyone earning above £8632 pa will pay National Insurance contributions and 20% Income tax on earnings above £12.5k salary yearly.

 

Like Blatters not seeking to argue but my view is there has to be a middle ground between mad Labour 'Nationalise everything' and a free market where a  CEO's earnings can move to a different jurisdiction thru accountancy moves thus avoiding paying a major share of tax. Previous Governments of all colours haven't sorted the tax situation.

 

The Liberals might have offered a middle ground if they hadn't gone mad.

 

Labour have just 'found' another £57.5Bn over 5 years (not in their Manifesto and not costed in their Grey Book) to cover the WASPI cost of ladies born in the 1950s having their State Pensions delayed by many years with negligible notice after Cameron brought in the changes in the 2010 General Election without Manifesto commitment (LibDem were in Coalition at the time).  It is an injustice on the ladies but can the full cost be met so easily? It seems with Labour there is no spending limit. This seems to be sheer opportunism from Labour after PM Boris ruled out altering the WASPI situation in the televised Leaders Question Time recently.

[Kingster]

2 hours ago, Blatman said:

due to "tradition" can't bring themselves to vote Tory. 

I guess I may fall in to this category - for me, voting Tory seems just “wrong” - I guess it’s being brought up in a family where your dad was a shop steward responsible for 1,000s men who went out on strike for better working conditions (not pay) in the 60’s. But as you say, and in my view, the Lib Dem’s are a waste of space, JC’s brand of Labour is frightening and the rest are a bunch of minority extremists. Sad times. 

[DamperMan]

I’m afraid again at this election I’ll be voting for the second worst likely option.   I think a lot of labour voters are shocked by how extreme socialist Jc and his crew are.    I’m no Boris supporter and I struggle with the spin from his team and the outright lies..   

 

we just need an honest party not out for their political idealiologies or personal gains.  There are slivers of ideas and policies I like from all of them sadly I hate the thought my vote could give the  mandate to do the stuff I don’t agree with.

 

I’m also increasingly believe we need to change to proportional representation.  As it stands in theory you could have a party with all the seats and under half the votes.. surely not representative of democracy.   

 

 

 

 

[Alan France]

I think I understand most of the points made, just a couple more from me.

 

I believe Boris is about as honest as the rest (...) but the opposition decided long ago that the best weapon against him was to paint him as “everything is a lie” That’s not really true.

 

In the leaders debate JC said South Korean had free Broadband at 95% + coverage. It’s not free, and the high coverage was achieved by having lots of private companies competing to achieve it. So nothing matches what he intends to do.

Free was a lie and the rest of his claim just ignores the facts about how it was achieved. That sums up politics.

[jeff oakley]

Chris King, I too was brought up in a household where Labour was the default vote. My Dad was a union official and supported the Labour party all his life, he just could not bring himself to vote otherwise. His belief was no matter how extreme the manifesto, it always got watered down.

 

Imagine my surprise when he told me the Labour party was not what it was designed to be and how he wished it would get back to doing what it did. It was set up in the main, by people who had started with little and with others joining with educated backgrounds it grew as the two party system did not work for the working class.

They wanted those from a poor background to have the same chances as the rich and worked providing education at night schools to enable people to develop and grow. That worked and when you look at some of the past Labour MP's they did not want to smash everything and destroy the rich, they wanted everyone to be richer and live better.

 

Even union officials were elevated to the Lords which showed how much sense some made and the positive contribution unions can make to all our lives. Some are more reasonable than others in this aim.

 

Years of war saw rich and poor die in their thousands and after the war things changed, by having sensible policies and a working dialog with the opposition, this we no longer have.

 

People in the Uk have equal opportunities, look at how many we now have like many MP's who started with nothing, what Labour want is equal outcome regardless of talent, or work ethics. Yes it is unfair that some work hard and never achieve but that will never change but it will get worse as they are the very people who will be unemployed first and suffer the most.

 

Corbyn has wiped millions off shares already, several big companies in the energy sector have moved their offices to Switzerland and other countries to protect shareholders from the theft of assets they have been told will happen. And in all this nationalisation, not once has anyone from the Labour party said they will reduce bills, no they will merely take the profit and use it elsewhere.

 

So we have a straight choice, which I know is never going to make everyone happy, vote for the Tory party, or Labour or the Libdems, any other vote is frankly meaningless, unless you are Welsh or Scottish. Out of the two most likely winners one will keep rich in the country, one will force them and their money out. Public service need the rich and the country needs more rich people but at the same time to make more people able to live in comfort.

 

I have never seen such a bunch of incompetents but one is much worse than the other as they are happy to see the break up of the Union and abandoning our Nuclear deterrent, p*** off our biggest allies and plunge us into an economic crisis. 

 

I hope to god that the polls are right and the only party that can avoid the spectre of Corbyn in number 10 do get a workable majority, but not one so big that they can do what they want

[DonPeffers]

21 hours ago, Alan France said:

I believe Boris is about as honest as the rest (...) but the opposition decided long ago that the best weapon against him was to paint him as “everything is a lie” That’s not really true.

 

 

To paraphrase a French saying   'even a stopped clock tells the truth twice a day'.

[jim_l]

For me, the simplest indicator that we have it wrong, is that in order to do the basics today we are having to spend our children's future wages, creating the poverty of tomorrow, storing up the problems of tomorrow while at the same time spending the money they will need to solve those problems, it is almost criminally negligent and extremely selfish. 

 

I view it as a machine, with flows of money,  if governments continue to borrow trillions while individuals walk away with billions there is only one future - broken and bankrupt nations!  The basic design of the machine is pretty good, we need to open a valve a bit here and close a valve slightly there. The rich can still get quite rich without impoverishing nations for the future. 

 

So who to vote for? More of the same is simply not an option, the most prosperous nations have rapidly increasing poverty and food bank use (yes - Germany included, much greater food bank use than the UK, France too!)   Borrow another Trillion or so and have a tinker with something that has failed us every time we have tried it - dangerous, really dangerous!

 

This election is offering nothing to those that want to see both fairness and prosperity. I am abstaining, our children can make the choice, they will have to live with the consequences.