We are holed up in the house due to the Presidential Debates going on practically in our backyard. We can't really go anywhere. Everywhere around us is blocked off! I can't wait to watch tonight!! GO BIDEN!!!! I am partially watching for entertainment purposes, if I'm going to be honest. I can't wait to see Sarah Palin squirm, and am anticipating some comical moments!!
My friend, Alaina, has written something GENIUS pertaining to the United States tax situation that is a must read! She perfectly sums up what so many of us have tried 100 ways to say. It's long, but TOTALLY worth your time......
If only our Politicians could speak in terms the average citizen could understand.
Our Tax System Explained: Bar Stool Economics
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 got.'
'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, ladies and gentlemen, 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.
MY RESPONSE:
Hmmm... I think that this would make perfect sense if we got beer for our tax dollars. However, that's not what our taxes pay for. We pay for things that are WAY more important than beer. We use taxes to pay for the military, healthcare, social security, parks, education, etc. And this example misses the disparities that exist in this system. Just a few examples:
I know a teenager who needed residential mental health treatment. The closest place who would take their military benefits to get treatment is five hours away. That is actually a better situation that the first four people would be in. The situation of the fifth, sixth, and seventh would probably have two options. Option 1: a closer treatment facility (where they can visit their child in the residential facility – very important to their success upon release) where the child would not be allowed to stay for long enough to get effective treatment. Option 2: a facility farther away (where they would rarely be able to visit) where they would stay longer – possibly even long enough to have some real success. The eighth, ninth, and tenth people would all have the finances to actually pay for a place that would be close enough where they could visit (and work on the family problems that contributed to the child being in residential) AND the child would be able to stay long enough for effective treatment. This is an example of individual disparity.
Yes, the poorest people get Medicaid and the oldest get Medicare. Medicare seems to be working out pretty well, but Medicaid does not. I know a lot of people who have children with special needs and cannot find a dentist that will accept Medicaid anywhere nearby. I've heard of people driving three hours away to go to the dentist. Which, with gas being so expensive, is very hard to do. Sometimes this comes out of food money. Sometimes people have to borrow it from family or friends. This is the situation that the first four people are in. The next level of people are ones that work but may or may not get benefits like healthcare. They go to the emergency room for things like the flu because they cannot afford health insurance. If you are poor in the U.S., you will receive the 16th best healthcare in the world (behind all of the other top nations). If you are wealthy, you will receive the best. This is the difference between life and death, because the less wealthy do not receive preventative treatment, and the people with no health insurance are merely STABILIZED, NOT NECESSARILY TREATED before being sent out of the hospital. Hospitals in poorer areas have less patients who have health insurance, so they are worried about cutting costs. They have a choice between treating all of their patients as well as possible (which would cause them to go broke and shut down) or help some of them less than others (in order to meet costs). This is a systemic problem for those in poor areas that the rest of us don’t have to deal with. We just have to pay for it. And believe me, health care providers resent having to make this choice – they took an oath to save lives and want to be able to do it.
Another perfect example of why the beer analogy is just false: their living environment. The first four people would probably be living in a poor neighborhood. These neighborhoods are usually far more dangerous and do not have strong police forces to keep crime under control. Since a lot of education funding comes from local taxes, the students in the poor neighborhoods are also attending schools that are more dangerous, have less resources, and newer and inexperienced teachers. Poorer neighborhoods also have more traumatized kids because of all the violence and crime they have lived through and witnessed. They often have anger management problems and their anger can be triggered by anything. They are also much less likely to receive counseling for their problems because they have to rely on free programs (which have very long wait lists because of a lack of funding).
The people with more money (who can afford to pay more beer in the analogy) can pay for a better house, a better neighborhood, and a better school. And they do.
I give these examples to make several points. This analogy – while maybe accurate on paper – has no bearing on reality whatsoever.
1. There is no way to compare the quality of life to beer like the tax analogy does. Beer is optional, but taxes help pay for the necessities of life.
2. There is no way that person #1 would be going to the same bar as person #10. Person #10 would be going to a very nice, clean, safe bar which would charge higher prices. Person #5 would probably be waiting on them, and person #1 would be in the unemployment line (sometimes because person #10 just sent their job overseas to increase profits).
3. Person #10 is probably the owner of a company or very prominent. He or she could raise the salaries of the people working there which would eliminate a lot of this disparity from the bottom up.
4. Everyone deserves to be paid a living wage. And if they were, they could afford to contribute more to society.
5. If CEOs ruin their companies through bad decision making, they leave with millions of dollars in severance pay because they had good lawyers to write it into their contracts. Anyone else would be fired with no severance package.
6. If wealthy people make huge amounts of money and then publicly oppose raising the minimum wage to $6 or $7 an hour for their employees (a living wage is estimated to be somewhere around $14 an hour although that varies by location), then I say they SHOULD leave our country. There are literally tens of thousands of Wal-Mart employees alone who are receiving public aid, Medicaid, and food stamps because their salaries are so low that they still qualify. And where does the money to support them come from? The rest of us.
7. As someone making above minimum wage but below a living wage, I have no pity for wealthier people paying higher taxes. Raise my pay, I will pay more taxes, and yours can be lowered. Until then, stop complaining.
8. Also, the wealthiest people do not pay as much taxes as the people working under them. Hear what Warren Buffet has to say about this – he compares his own taxes to his employees. He has offered $1 million for charity for every major CEO that could show that they pay a higher percentage of taxes than their secretaries, and there have been no takers so far. So actually, using the bar example, the richest person would probably really be #9, and #10 would be his/her secretary.
http://www.youtube.com/watch?v=Cu5B-2LoC4s9. The income gap between the rich and poor in the U.S. is rumored to be the highest it has been since the Gilded Age (Rockefeller, Carnagie, rise of the labor unions). To see the disparity right now, click on the link below and make sure to click on the place where it says “Facts and Figures: Executive Pay and Worker Pay Worldwide.” It will have five slides, and the U.S. stats are on the last one. As you can see, the executive pay is generally 475 times the pay of the factory floor worker.
http://www.pbs.org/now/politics/executive2.htmlTAKE HOME MESSAGES:
There is no way to judge our tax system based purely on numbers. And here’s why.
A person making minimum wage ($6.55/hour) and working 40 hours per week makes a total of $13,624 per year assuming that they work all 52 weeks in the year and/or get paid medical leave (which is often not the case). An extra $10,000 for them would mean a huge increase (73% of their salary) in their standard of living.
According to
http://www.aflcio.org/corporatewatch/paywatch/, “the chief executive of a Standard & Poor's 500 company made, on average, $14.2 million in total compensation in 2007.” A full year of work at minimum wage ($13,624) would be .09% of their yearly salary. Based on those figures, an executive would have to work less than 2 hours to make the same amount as a person working full time for minimum wage for an entire year. An extra $10,000 would mean nothing to them.
Read “Bowling Alone” by Robert Putnam for more information about pay disparity, social capital, and social responsibility. He shows how these things have changed over time.
Shouldn’t people be able to make a decent living if they put in the same 40 hours/week as everyone else? Is there any job in the world that deserves to be paid $14.2 million per year?
Alaina Pipas, MSW
I have a bachelors degree in Psychology from Washington University in St. Louis and a masters degree from SIUE. I work as a social worker in a successful program where I get to truly help my clients. I deserve to make a living wage, but I do not receive one. I pay my taxes just like everyone else, and I do not complain about them.
I welcome comments and discussion on this topic.
