The tax system explained in beer

In a nut shell, The Tax System Explained In Beer



> THE TAX SYSTEM EXPLAINED IN BEER

>

> 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 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

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 dollar 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 dollar 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.

>

> David R. Kamerschen,

Ph.D.

> Professor of Economics.

>

> For those who understand, no explanation is needed.

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

>

> P.S. ~ And, who has ever found a job from a poor person? ~ or one who is

afraid to take the
huge risk?!

The proposed 5% raise in Gas tax and the raise in Cigarette tax surely will only effect the rich... Because only the rich drive and buy cigarettes... LOL I hope the economy just crumbles!

David R. Kamerschen didn't author this. I wonder why people blatantly lie when attaching a person's name to a story. I guess seeing Ph.D. is supposed to make us think it is legit???

^^^ I wouldn't care if Grant wrote it himself... Either way, it's a good illustration of the truth.

Sort of a funny thing to equate government services like the military, schools for our children, courts, law enforcement and infrastructure to going drinking, as if those things are a frivolous indulgence that can be quit with nothing but upside to the rich guy.

If that were true wouldn't the wealthiest among us live in the most lawless places?

^^^ Hey all I know is Grants post made me thirsty...

You need to look around you.I see lots of businesses closing,workers losing their jobs or getting their hours reduced.Pay cuts for salaried employees,benefits being reduced,Holiday pay is being taken away also.Who's to blame? I guess it's still Bush's fault. We need to educate our children so that they understand they have to work for their money.The Obama train is full and running out of tracks,the wreck is coming soon.

Funny story but not accurate.
If the bottom four had children they would get a refund in the amount of the child deduction . The richest would need to pay them for the privilege of drink with them.
And... Since the bottom six outnumbered the top four they would force all to drink the brand the poor favored.

So anybody pick up any holiday beers yet? I got a couple cases of Anchor Steam's holiday ale. Costco was selling a 4 pack of Sam Adam's holiday beers. The 1st one I've tried, Norse Legend, was surprisingly good.

Just picked up a twelve pack of my perennial favorite Sierra Nevada Celebration Ale.

Funny story but not accurate.
First the richest guy does not pay anything (check Romney's tax returns) He gets a free beer and enjoys it! Its Free! He even has his own bar and doesn't talk to anybody, but thinks he has all the answers!
The ninth richest guy manages all the money transactions so he says he pays more than everyone (but really he just pockets the money) Free money, Free Beer!
The eighth richest guy manages all the beer makers at the job site, he dedicated,and knows everything about the beer making process he buys most of the beer for everyone but knows there is NOTHING he can do about it because of the management situation, so he buys everyone a round! He actually believe that if the workers are paid less he will make more money!
The seventh, sixth, and fifth richest guys(can we stop using the term rich now?) These guys MAKE the beer, they do their job day in and day out, they produce the product that everyone needs and buys, they do not get a free ride and have to buy their own beer, plus they are charged an entrance fee to just get into the building, again the management situation makes them pay! These guys have the power to do anything they want(they just don't know it!), they can fire their boss, they can pick the beer they want to make, they can even make all the rules that have to be followed while in the bar! Management has them under their control now(they think) The truth is if they ever banded together they could do anything they wanted to!
Then their are the third and fourth poorest, they get into the bar because they serve the drinks, so no free beer for them! They are hard working but people in the bar think they still make too much money!
The two poorest fellows are allowed in the bar for free, they mooch off of anyone that will listen to their sad story plus they get free beer tokens from the management! (whats up with that!) They just get stuff for free and they still have a bad attitude(management is very puzzled by this situation)

Jo Shmoe...the rich do pay taxes...I work with them and prepare their returns daily. In fact Romney's return had 10mil in cap gains = lower tax rate at 15%...hence the skewed "media" figures. The reduced capital gains tax rate "was" the United States' way of creating an incentive for the rich to reinvest in companies and the economy. If you head over to the IRS' website and take a look at the statistical data...the rich pay the lion's share of the Tax Revenue in this country. People are going to find out real quickly what happens when you take away the tax break for investing in high risk start up companies. As far as "going somewhere else to drink"....yup that's happening currently. The UHNW (Ultra high net worth) can already afford to pay for a private security force, private schooling and healthcare out of pocket...so they could care less about what the government "promises" to provide them for the outrageous amounts of tax they pay.

Originally Posted by liquidmx

The UHNW (Ultra high net worth) can already afford to pay for a private security force, private schooling and healthcare out of pocket...so they could care less about what the government "promises" to provide them for the outrageous amounts of tax they pay.

Ahh, but they usually like the rule of law (ability to enforce contracts), a reasonably educated workforce, and reasonable level of safety for its employees. Not to mention a stable society to whom goods can be sold and for whom services rendered.

ICBW, but I haven't heard about any beer abstainers moving en masse to Somalia to strike it rich.

if it would be that easy for the 'rich' to move to a different place where you don't need to pay taxes or to just opt out ...

The purpose of the tax system is that you can't opt out so the analogy isn't really taking into consideration the fact that even the rich will continue to show up at the bar - they may just opt to drink something more expensive.

However taking a few of the talking points up: I do believe that we all need to pay more taxes (please note ALL) - not just a few but that should follow a regressive approach as it has been designed here and applied equally similar in pretty much every other country democratically organized with limited corruption (sorry Florida) and the basic pilars of segregation of powers in place. The "Bush" tax cuts and its continuation under the past and current congress (I apologize to call them 'Bush' tax cuts but that's what they're known for despite the fact that it needed congressional approval over various terms) is one of the strangest things I have seen in regards of lowering our taxes as it was known back then that due to demographic changes the current rules for social security (retirement age, benefits etc.) can not continue as the system will no longer take as much money in as it pays out. So even those who may at this point feel like they pay too much taxes - think again. That system is based on the principle that we don't pay in for ourselves - we pay in for current eligible recipients and should be able to expect the same when it will our turn to receive benefits. I'm equally baffled by the fact that we still keep a a salary cap on it as this would at least put one of the entitlement programs on a better path as it is today (and don't forget - suggest to your parents a change in benefit and expect the appropriate answer ...)

We (and I include myself despite being born in a different country and only being a US citizen for a few years now which I'm very grateful for) have not paid our bills for a long time - not just since Bush or Obama took office. This leads back to the comment I made above about our parents: They have left us with a considerable amount of obligations for which they never picked up the check at the bar to stay with the topic. Suggesting therefore that benefits for them should be part of the debt discussion is more than appropriate as this would be for me part of 'we all need to pay more' - in this case it is 'we get less'.

Now as we're already on the 'socialist' train - I actually believe that the mandate for health care coverage will reduce our bill as the burden overall is shifted to each one of us. We all pay already for everyone who isn't covered but I think that quite a few people have mistaken 'employer health care coverage' as a freebie until the contributions started to go up back in 2008 or even before that. I have had private insurance for almost 8 years now and I can prove that the premiums have actually come down since congress enacted the health care act and I'm receiving today better coverage than I got 5 years ago for less money. I still have to say that the cost seems to be high if I compare it against my benefits but I prefer not to take advantage of those benefits as I likely would no longer be able to enjoy a sunny afternoon on the lake with my family, friends and dogs ...

So to end this rather long comment on a 'borrowed' and slightly altered quote from another thread (JFK): Do something for this country as you would like it to do for you - we're a society and most of us (probably everyone who participates on this forum) never have to worry about a roof over their head or food on their table. Paying taxes isn't a bad thing - we all get something in return for it - at times it may seem like we're being shorthanded but I know from my own experience that I'm incredibly lucky to be born in a country which provided me opportunities - one of them brought me here to the US. I have seen places where you can't take that fortune for granted and I don't know if you call this fate or not but I'm grateful for everything my country of origin as the US has given me - I can't and wouldn't dare to ask for more ... except that maybe that our congress actually starts looking for solutions which go beyond party lines and keeps us moving forward ... that would be quite nice.

and full conclusion: I did vote for Obama this year and would have done so 4 years ago but wasn't allowed/entitled/eligible yet. I admire his intellect and his sometimes surprising ability to not get emotional (would love to have a slice of that pie) among a few other things. I didn't like Bush - mostly because of his push to go to war but have enormous respect of the way he left politics. He was under attack from pretty much every possible side but he chose not to go on the offensive - pretty awesome and I equally admire him for that.

"so they could care less about what the government "promises" to provide them for the outrageous amounts of tax they pay"
Yes, 15% is Outrageous! Don't even start the fear Mongering that the rich are going to take their ball and go home.
"I could make millions of dollars this year, but I'm Not going to because the Tax is 25%, when it was 15% I really liked making my millions, but now that its 25% forget it!

I think....actually, I know you are all missing the point. We can conjecture all day about what is "fair share," however, the reason taxing the rich is a bad idea is because the rich are the ones that create jobs and create wealth in others. Increase taxes on the rich and you decrease our ability to create jobs, employ people, and purchase goods.

These are the facts and they are indisputable.

I honestly think you have missed my point: The 'rich' can afford to pay more taxes and most of them don't care as the tax system as it is designed as of now favors them more than it does you and me (and BTW I said I'm willing to pay more taxes b/c we don't foot our bill and haven't for a long time). The 'rich' people don't create jobs - ideas and innovation does. The 'rich' fund those ideas (and all those who have the ability to put money into ideas instead of the stock market btw) - b/c it will ultimately pay off. So I'm glad they do so - and they won't stop because of higher taxes. They are more than willing to pay taxes for what they earn as long as they come out ahead. If you are a wage earner = W2 - you're at a disadvantage. If you have your own corporation and make/provide something the society benefits from - you're more than likely coming out ahead. Based on your thoughts we shouldn't tax the rich at all and we all would have jobs. I'm not sure this country exists ... or maybe it does - it's called the Vatican. Or Monaco. However the contribution to the real world (prosperity for example) isn't really what either country is known for.

I don't know why I'm wasting my time debating you it's clear you don't have an inkling about how economics work in either the macro or micro sense.

Obama is an ideologue and as such is driven by ideology not common sense or economic theory. He's paying the poor to do nothing out of principle and of course gets votes from the poor so he creates more poor and in turn gets more votes. Poor isn't the right word though, lets say "recipients."

Any sane person who works hard for their money should be appalled by this, but, not surprising, people voting for Obama really have no idea why they are voting for him other than the fact that it is the cool thing to do.

The most valuable piece of info you'll ever receive: the easiest lie to get someone to believe is one they want to believe.

Game, set, match.

Originally Posted by SimonSez

I don't know why I'm wasting my time debating you it's clear you don't have an inkling about how economics work in either the macro or micro sense.

Obama is an ideologue and as such is driven by ideology not common sense or economic theory. He's paying the poor to do nothing out of principle and of course gets votes from the poor so he creates more poor and in turn gets more votes. Poor isn't the right word though, lets say "recipients."

Any sane person who works hard for their money should be appalled by this, but, not surprising, people voting for Obama really have no idea why they are voting for him other than the fact that it is the cool thing to do.

The most valuable piece of info you'll ever receive: the easiest lie to get someone to believe is one they want to believe.

Game, set, match.

Well said!

some people will never get it!

Where's my Obama Phone!

Originally Posted by SimonSez

I don't know why I'm wasting my time debating you it's clear you don't have an inkling about how economics work in either the macro or micro sense.

Neither do you. So it would be best if you didn't try to school anyone.

I don't know either as I'm not sure why you're debating Obama and I'm actually talking about taxes based on the thread itself. I'm also equally unsure why you have to be condescending about my education which isn't necessarily visible from either my profile nor my posts in any of the threads here but I can tell you that I got an excellent education in the country where I'm from (and it did include economics on both levels) - one of the reasons that I got admitted into the US back in 1998. My education is likely not as recent as yours so my apologies when I may come across as rusty.

So now going back to the tax debate which I was referring to in my first post: I clearly said that we ALL have to chip in more and ALL have to get less. It is likely that we probably don't give and take equally at the same time - simply due to age etc. but that is beyond the point. My 2011 tax rate was 15.01% - so I could be quite happy for paying as little as that. In 2010 it was 11.18 and in 2010 where my tax rate was 7.27%!!!

Now I could call this 'score' as I have never paid as little as I pay here in the US but I think the opposite is quite true. I'm complying with the system which gives me incredible tax breaks I basically don't deserve as I could easily afford to pay more - similar to what Warren Buffett has repeatedly said this year.

So cutting taxes on a local, state and federal level has benefitted me greatly but I'm sure I don't deserve it. Knowing that education is always on the chopping block makes me sad. I made a reference above to the education I got - my teachers were awesome and deserve most if not all the credit for the fact where I'm at today. I said earlier that maybe being a little more grateful and appreciate things could get us to a more civil tone and hopefully to solutions for the problems we're facing. I prefer not to leave my children with a debt burden as our parents left us with. I'm not going to yell at them - I'm asking them to accept that benefits need to be cut and I prefer our children to deal with the problems they will face in 10 or 20 years from now which are relevant instead of bickering and wondering how to pay the interest on a mount of debt which they didn't cause in the first place.

Originally Posted by monkey_butt

Now I could call this 'score' as I have never paid as little as I pay here in the US but I think the opposite is quite true. I'm complying with the system which gives me incredible tax breaks I basically don't deserve as I could easily afford to pay more - similar to what Warren Buffett has repeatedly said this year.
.

I appreciate your point of view, and am glad you made it to this country bringing your knowledge and contribution. If you want to pay more than you are required, please decide what the "fair" amount would be for you to pay over your required amount, and write a check to the government for that amount. Nobody is stopping you, or Warren Buffett, from doing so. Please put your money where your opinion is.

I do not want you to do that, I want you to take that money and buy things, build something, or invest in someone elses work.

Hypothetically:
If you decided that you should be paying $10,000 more in taxes, but do not pay it and choose to keep it, then do not beat yourself up for being a hypocrite. I, for one, and many people that think like me do not think you are a hypocrite. YOu think that $10k should go to the government, and I know that if you keep that $10k that it WILL go to the government, all of it, eventually, all while benefitting many others on its way there.

Its simple.

If you give the Government $100, they get $100 and spend it all (actually spend $150 of it somehow... printing press anyone, QE3 anyone?). Most will go to the Feds, some will go back to your state, less of it to your city, even less of it to your community, and almost none of it to your local business.

If you keep that same $100, you will put it in a bank, they will use it to make loans and invest, you will withdraw it all to buy 5 books at the local book store for $94. $6 in tax added to that will go to your state (most states), some of that will go back into your city, some of that to your community. The business owner takes that $94 and pays the wage and employer taxes for their employee Mike. $10 goes to the fed and state, $84 to Mike. Mike pays state income tax of $8.40, fed income tax of $16. ($60 left). Mike buys a video game at Best Buy for $55 plus $5 tax. $5 goes to state, city, community. $50 to the business. Owner uses that $50 to pay for his employee Bob's wages. After employer/employee tax Bob gets $44, after state and fed tax bob gets $32. Bob goes and buys Jeans at a skate shop for $29, pays $3 tax. Skate shop pays Tiffany's wages with the $29, after payroll taxes going to the state, tiffany gets $26, after state/fed tax she takes home $18.50..... this continues until there is $0 left. The Government ends up getting all $100 to do what it wishes, but benefits a dozen+ people along the way,

You go ahead and voluntarily pay more taxes and contribute to keeping the government moving.

I will not pay more taxes, benefit a dozen people, then contribute to keeping the government moving.


Oh and tax the rich more, they will probably continue to invest in your ideas and companies, risking money that they have less of for a chance to make a profit that they will see less of... and will cut back on their family vacations, houses, cars, dining, kids schools instead of those unattractive investment opportunities

It's pretty clear that Nicolas has a fine grasp of economics, just a differing view than yours Simon. The whole, you can't tax the rich mantra has been beaten to death over the past years but everyone seems to gloss over the fact that while we're talking about increasing the marginal tax rate of the exceedingly wealthy, we're still talking about a tax rate that is near the lowest it's been in history. And this idea that the more money the rich have, the more they stimulate the economy, isn't necessarily true since those with less money are more likely to put their entire income back into the economy, i.e. the more money you make, the lower your marginal propensity to consume.

We need to return to a stronger progressive tax system that we've had in the past, because current rates have done nothing but created an ever increasing income disparity in this county. I will see an increase in my taxes because of the tax changes but that is a burden I'm prepared to shoulder because I believe it is in the best interest of my county.

Taco, Burrito, Enchilada - (Sorry, I thought we were just throwing random sentences at the end of our posts to somehow add credence to them)

^^^
"You don't deserve it?" You are talking like a prisoner, of course you deserve lower taxes!!! The gap here is that you think we should all just pay more to address the shortfall, I'm offering that we need more people paying taxes. Use the water analogy, some are carrying the water and some are drinking the water. If we had more people carrying and less people drinking the people carrying the water would not have to carry as much. It's heinous that 47% of us receive more than we contribute. How can you have a society where half the people are freeloading? Obama of course supports this, more voters for him.

This is the problem, many Americans are ok with feeding the social programs. You are not helping these people by doing so, the ol' "give a man a fish" proverb.

At any rate, your anti-immigration Mexican food remarks aside, I don't think we are going to convince each other. 4 more years then well get a better prez.

Why is it assumed that all increased tax revenue will go to welfare programs? Can't it be spent on education, deficit reduction, maybe help pay for one of our unfunded wars? I don't think we're going to convince each other either, since I think that blaming all of our problems on social programs is over simplifying things.

Anti-immigration? What the?

On a Macro scale its sad that ANYONE has to pay more in taxes to support a government that cannot operate within its means.

Simon, not sure if I shall give up. I have now twice stated that some have to pay more and some should get less. This would include the so called 47%. Now based on your age I would assume that your parents are likely not yet at their retirement age - my apologies if I got this wrong but I'm using this as an intro to the next paragraph.

Romney's comment about the 47% was poorly construed and should have never been said but that's too late now. However various news stations took his comment and associated the various 'classes' of receivers to these 47% which get some handout from the government in one form or the other. As you may likely remember this also includes everyone who receives social security - may it be b/c of age, spouse survivor etc. Now when your parents and eventually you and myself will reach retirement age - we all become part of the so called 47%. I asked not you in particular but in general how the parents may feel when we tell them that 'oops sorry - but you haven't paid in enough - pot is empty - you won't get anything' but you may want to truly hear what your parents think of that idea. I hope that they have a nest egg and preferably not just a 401K b/c too many people who were hoping to get by with social security benefits actually don't. Every time I'm going to the grocery store and I see an older person comparing prices or putting their groceries on the belt and see how little they sometimes buy (and I presume can afford) - it's sad.

I did say however that I favor a reduction in benefits due to demographic changes etc. - again I'm not going to repeat all of that as I assume you read it but never responded to it.

I have to add one more comment going back to the education I got: One of my teachers once said that we (my classmates and myself) should give back to the society b/c of the education we got - paying for tuition etc. wasn't covering even remotely the cost of our education. He pointed out that one of the things we could do is to enter politics, may it be just locally or ultimately on a bigger platform. I haven't forgotten this 'lecture' and always comes to mind when I read the famous JFK quote.

Now to close this answer w/o throwing in random sentences which were meant to be funny and have nothing to do with a racial or discriminatory tone: At your age you have for the majority of your life so far been on the receiving side. Not necessarily from the government only but likely from your parents first. My wife grew up in the foster system and I'm glad it exists but is tough - for foster parents and kids alike. I don't mind that my tax dollars support it - I'm glad it does). Maybe you can accept that none of us got to where we are today just by ourselves (this is in reference to Obama's poor comment which was torn apart here on this forum a while back - equally poorly construed btw) - we all got help, education, advice and hopefully some manners along the way with it.

If you take the last point personally I also explain you why: I did say that I didn't appreciate the condescending tone in your first reply as it was uncalled for. You still haven't had the courage to apologize. That would have been nice and been appreciated. You have chosen not to. Sometimes not doing something gets as much or more attention than doing it.

Originally Posted by fly135

Neither do you. So it would be best if you didn't try to school anyone.

Jokes on you, you've already been schooled, and one day, you'll realize it. You guys are only screwing yourselves over, me and my family will be fine.

^This is sounding like a reemergence of SamIngram/TuckerMcIlroy.

"you've already been schooled", "me and my family will be fine."

And why will you be fine? Because you have a big arsenal to protect your compound?
I would bet most people on this forum have chosen to be taxed at a higher rate. Do you live in a nice neighborhood which has higher taxes and good schools or do you live in a poor district where only the poor can live and the schools are not supported. People that can afford it CHOOSE the higher tax district with the better schools and probably a lot less crime. So, Sam I am, where do you live?

I have to add one more comment going back to the education I got: One of my teachers once said that we (my classmates and myself) should give back to the society b/c of the education we got - paying for tuition etc. wasn't covering even remotely the cost of our education. He pointed out that one of the things we could do is to enter politics, may it be just locally or ultimately on a bigger platform. I haven't forgotten this 'lecture' and always comes to mind when I read the famous JFK quote.

I do not know the context in which your teacher made this statement, but as it stands, I disagree completely. The best way to give back to society is to produce, invent, improve something, creating a product or service that people want. Grow and become a strong company, pay your required taxes, treat your employees fair, be an ethical business man, be charitable with your money and raise your family/children to do the same. THEN enter local politics to ensure that your children and grandchildren have the same opportunities as you did by protecting business and your citizens from the greasy handed government.

Also, does anybody know what the full name of Social Security is and how it works? (I know this answer, just want to know if anyone else does)

I do not know the context in which your teacher made this statement, but as it stands, I disagree completely. The best way to give back to society is to produce, invent, improve something, creating a product or service that people want. Grow and become a strong company, pay your required taxes, treat your employees fair, be an ethical business man, be charitable with your money and raise your family/children to do the same. THEN enter local politics to ensure that your children and grandchildren have the same opportunities as you did by protecting business and your citizens from the greasy handed government

Johnny, thanks for pointing this out - I should have added an explanation: The system will not reimburse/pay a law maker (even on the federal level) enough to do just that and is not a 'full-time' job - they convene 4 times a year and then return back home and b/c of the country's size they can commute daily to and from the capital - so pretty much every law maker on any level still needs and has a job - probably comparable to someone who sits on a county board etc. The reason that our teacher told us that was related to our education: He strongly felt that due to our law classes etc. we had a solid understanding of how government works, what our rights are etc. A lot of people have a misunderstanding of government - its workings and some people are plain afraid or intimidated. So his comment was meant for giving something back to the society by going into politics - may it be on the executive or lawmaking side - as it won't pay enough to pay your bills and you won't have lobbyists stroking your backs either.

So my comment is not equally applicable to our system here - sorry.

Also, does anybody know what the full name of Social Security is and how it works? (I know this answer, just want to know if anyone else does)

I could google it ... no I honestly don't - wasn't part of my citizen's test

Here is why taxing the rich is a waste of time:

1. It doesnt really create THAT much more money relative to what is needed. What was the last figure, $80BB? Thats the equivalent to the change you would find in your couch. When you find change in your couch cushions, how much does that affect your household budget? It doesnt. The same is true for increasing tax on the rich. Its nothing but a talking point to get the votes of the not rich.

2. The rich in a capitalistic society control the flow of money. They dictate their own take-home income, therefore a "tax" never affects them directly. It hits downstream. All taxes on the rich are converted to "cost of living" increases on the not rich.


The rich already pay 80% of the tax burden. How about we just insist the government cut spending to below the tax revenue? You want the rich taking their disposable income and competing with one another, driving down the cost of living for everyone else. You dont want to whip them with taxes and have them supplimenting their "need" money with disposable money and driving up the cost of living for everyone else.

Your landlord is rich. You raise taxes on him, he is just going to offset his loss by raising your rent. He takes home the same money as before, and your cost of living goes up. His wealth accumulation is unchanged and yours is deminished. So whose pocket are really being affected when you tax the rich?

The reason government entitlements are always attacked is because they are luxuries, not needs, and certainly not the responsibility of the government. When you get an unexpected financial hit at home, which fund gets hit first, the mortgage, the car note, the education savings, medical insurance payment, or the vacation savings? Obviously, the vacation because it isnt a responsibility, its a luxury. But medical insurance payment is a much bigger chunk of change, is over-priced, and is corrupt is all get out. Why not pull from that instead? Because medical coverage for your children is a responsibility regardless of how poor its run. You should get rid of the luxuries that arent responsibilities first before trying to recover money by reducing medical coverage.

I know military spending could be cut, but military protection is something the government SHOULD be responsible for. Entitlement programs are not the responsibility of the government, and should be cut first, even though the actual dollar amount may be less.

Originally Posted by jason_ssr

I know military spending could be cut, but military protection is something the government SHOULD be responsible for. Entitlement programs are not the responsibility of the government, and should be cut first, even though the actual dollar amount may be less.

That isn't an argument against cuts. Here's a couple arguments against cuts...

- The founding fathers intended the govt to build an army that costs as much as the next 13 nations put together.

- The Constitution dictates that we invade and rebuild other nations to give them democracy.

- The core principles behind US defense is that when terrorists residing in nation X attack us, we attack nation Y because the American public are primed for a few good wars.

Jason, not sure if I interpret the term 'luxuries' the same way as you do but as you use the term 'entitlement' in the following paragraph I assume that's what you mean.

I prefer to paste a link here from the heritage foundation as it shows in a simple form what the goverment spends the money on in 2012 (can't say ours as we borrow 40 cents on each dollar as it currently stands - has been less in the past but we have done it for way too long).
http://www.heritage.org/federalbudge...ement-programs

22% Medicare/Medicaid/other health care
21% Social security
19% welfare and other social programs
19% national defense
6% Interest
4% eduction
1% foreign affairs
8* other/rest

I can't find the actual percentage comparison right now (hmm ... google ... anyone ;-) ) but I copied the following picture in to somewhat have a chart showing past development even though it's more focused on the future (again from the heritage foundation web site and their reference to the data available from the COB).

So as I have now established the base let's continue. You said that 3 of the 4 main spending are luxury. If we take those away then we're left with national defense and the rest which would amount to about 40% of our spending in 2012 - so deficit for this year taken care of and another 20% left to pay down debt we have already accrued.

Sounds good to me but I wonder how your parents are going to like this. I did argue before about healthcare and bring this particular topic purposely back up. We don't want government run health care. So I would encourage everyone to then go and buy their own instead of letting the employer pay for it so the employer can use the money to invest into the business instead (this is somewhat paraphrasing on what has been said in the forum in general in regards of the cost for small businesses etc.). Don't forget that this will now apply to ALL senior citizens as well and also understand that we just took their social security away at the same time - I hope your parents have a nest egg - otherwise they will move in with you probably very soon or won't get the medical treatment they need.

Medicare and social security were both programs implemented to protect our older generation from falling thru the cracks - this is partially due to the fact how we live today, that we have less children etc. We as a society are unlikely to go back in time and revert to the living standards and habits we had 50 or 100 years ago - I don't think this is realistic. For those who do - cudos to them - it's a huge responsibility and can become a fulltime commitment for anyone who does this for his/her parents - I admire those (or you Jason) if you do. I'm honest I not really willing to at this point in my life but likely would if I had to (but would also look for alternate options I could afford).

So to conclude this reply to you: We're not fixing this problem by saying 'spend' less. We (you and me) have to also accept at what cost this will come. If you want to go back and just have the government protect our borders and that's about it - you also will have to accept that nobody will come and clean up after Sandy or plow the street in front of your house or there may not even be a street until you build it.

If it hasn't become obvious - I'm probably more of a centrist than anything else. I voted democratic because I do agree with Obama but I also liked Huntsman and hope he runs again in 2016. I'm not trying to polarize I'm engaging in a discussion instead of pointing fingers. I also like to keep our older generation covered in a social 'welfare' way as it makes sense but they will have to give up something to make this work. I'm willing to chip in more (I disclosed earlier in this thread what my federal tax rates are because I assume that quite a few are likely paying more than I do and I don't think I'm taking less from the government than they do). I could link to a thread sidekicknicholas started earlier if we have always been so polarized. I don't know - only been here 14 years but I do believe it has gotten worse from where it stood in 1998.

I allow myself to compare congress and the way we are engaging in political discussions to a family - the parents would be divorced, arguing about spousal support and the kids don't want to live with either one of them ...

Jason, not sure if I interpret the term 'luxuries' the same way as you do but as you use the term 'entitlement' in the following paragraph I assume that's what you mean.

I use the term "luxury" in contrast to a "necessity". There are countries who run a balanced budget who use profits from natural resources as a slush fund for entitlements. Im not opposed to entitlements as much as I am funding them through tax revenue.

I'll save you the research. Social Security, or SSI, is "supplemental security income". It was designed and implemented in 1937 mainly to protect aging white males. It was an "insurance" program that one pays into so that in case it was needed, it would be there. The earliest age that this insurance could be collected was 65 years old. Guess what the life expectancy was of a male in 1937..... 58 years old. Even women had a life expectancy of only 62 years old. So this system was to protect those that lived "too long" (as well as other medical problems, handicapped, blind...etc).

Fast forward to 2011, life expectancy was 78 years old for men and 84 years old for women. So, your next question should be, at what age in 2011 can one collect SSI? The answer SHOULD be approx 86 years old, unfortunately it is 59. The system was designed under many assumptions, one that there would be a consistent growth in reproduction numbers (false, less people are having less babies) and another one is that life expectancy will stay about the same (false). They did not design the system to change with the changing demographic.

The answer? Start raising the age that the insurance can be collected in a tiered system. Don't touch it for people getting close to retirement, but on people like myself (those of us under 40) they need to increase the age we can collect. On my children, they need to increase the age as well. Otherwise, those of us who pay into it our whole lives will get nothing.

Originally Posted by johnny_defacto

Fast forward to 2011, life expectancy was 78 years old for men and 84 years old for women. So, your next question should be, at what age in 2011 can one collect SSI? The answer SHOULD be approx 86 years old...

"Should be" as in the govt should rake in tons of SS money and pay very little out? I'm pretty sure that's the way it would be if the retirement age was 86.

Missing from this analysis of how old people are hurting us is the fact that they have to compete with the Fed to loan money to banks. Unfortunately the Fed can print money and lend it at zero interest. Coincidentally that forces them to higher risk investments. How fortunate for Wall Street and all those defined benefit pension plans that rely on the artificially high price of stocks buoyed by tax incentives and the Feds cash giveaway to banks. And the economic benefits of monetary expansion that pressure the dollar lower and precipitate inflation.

So when it comes time to take away old people's SS you should also be willing to force the fed to stop printing money and giving it away at low interest rates. Good luck with the employment numbers after that. And tax deductions for retirement savings should go away as well. The market should be able to operate without charity from the govt. Unfortunately those defined benefit plans will go bust if that happens.

That's the problem with targeting one specific group. Everyone else wants to keep their charity. And what makes it easy for them to go into denial is that the charity is frequently hidden in the tax code.

A good example how easily people are fooled is the ACA tax penalty. It's perfectly fine to vector tax money to HI companies because it was a deduction. But when its a penalty it became allegedly unconstitutional. Except there is little different between a tax deduction and a tax penalty. A tax deduction is a tax penalty for everyone who doesn't buy HI, or even worse those who do but can't get the deduction. I can turn a penalty into a deduction by just raising taxes and then offering a deduction.

"The system will not reimburse/pay a law maker (even on the federal level) enough to do just that and is not a 'full-time' job - they convene 4 times a year and then return back home and b/c of the country's size they can commute daily to and from the capital - so pretty much every law maker on any level still needs and has a job..."

Sorry to break it to you, but "career politician" is a career, at the Federal Level, State Level, County level, and even some lower levels. My state senator makes $95,000+ a year PLUS $160 per day he is in session. My US Senators make $170,000 per year each, plus their daily stipend. On top of that, they get a free car, free travel, free hotels, free meals, full staff...etc. On top of that they get free healthcare, and not the CRAP you and I will get from Obamacare, but great insurance, fully covered for everything, at no cost to them. On top of all that, they get all these benefits FOR LIFE, even if they only serve ONE term.

It was designed by our founders to be the way you described it, but after years of "voting" for their salaries and benefits and retirements, they now have a cush little job. It is no longer "public service", it is a corrupt career.

In Nevada we have the sort of underpaid part time legislature that Nicolas references. Meets once every two years for five months. The legislators are very poorly paid. The result is that the only "full time" legislators in our state are lobbyists. Special interests run the show here because our legislators don't have the time to become experts.

So the other side of the fence isn't necessarily greener.

I like nevada and I am glad it is run that way. I believe that other states are run similarly, off the top of my head, Arizona and Texas I think. Your state Senators (2) and your 3 house reps are full time politicians though. All that I just posted above is true for those people.

I never said anything about the "other side", lobbyists or special interests. Funny thing is you can blame the lobbyists for "running the show" poorly, but it is OUR representatives that make the laws and vote on them. The special interest groups HAVE NO POWER THAT ISNT GIVEN TO THEM BY OUR POLITICIANS.

Originally Posted by johnny_defacto

I like nevada and I am glad it is run that way.

Please bring your business here! We're on sale!

Originally Posted by shawndoggy

Please bring your business here! We're on sale!

lol. I am headed there in 20 years when I retire... unless California gets smart and stops running this state like California and more like Texas. All the guys that are retiring are headed to Nevada, AZ or Tx... and if starting a business or moving their business out of CA, they are all going to... Texas.

monkey- okay, I was confused a bit because you were using "my country" but I thought you are a citizen now of this country... honest mistake.

Did you see what happened in Greece when they tried to increase the retirement age by what, 2 years?

If you save money for retirement, you do not have to "wait to retire until age...". you can retire when you are ready. SSI is not a retirement, it is a safety net for the worst case scenario. However, when SSI eventually gets reconstructed to sustainable levels, our people will be out on the streets as well.

Johnny I was referring to a different country initially. On a local level here in the US it's somewhat similar but I didn't mean to generalize as the example of Nevada shows.

In any case raising the retirement age is necessary - I stated that a while earlier. What I also deem necessary is removing the income cap - yes you could consider this a tax increase on everybody making more than 111K or whatever the current limit is - haven't paid much attention to my payroll lately but it would affect somewhat middle and upper class.

Johnny, yeah 'my' country is kinda difficult as I have 2 now

Yes I'm watching Greece and Europe - I'm from that side of the pond ... but I do think that any example of the PIGS (Portual, Italy, Greece and Spain) is just plain bad. I made some fun earlier of Florida as I was living there for 4 years and we still had a place in SoBe while we were living in the Twin Cities ... The first year after moving to the US - Florida felt like Italy - corruption pretty much everywhere and run like a banana republic. It has somewhat improved but there's probably no year w/o one of their law makers being charged with some form of corruption etc. So anyway - not the point - I like Florida and always will - despite some of its shortcomings ... There are other participants who have their budget under control and it's not just Germany.

I do think that the EU made one huge mistake: Tying the participation in the EURO zone to the fiscal responsibility WITHOUT being allowed to check/audit. It obviously backfired but neither of these countries has an overly good track record of collecting taxes and more so having a shadow economy (Italy actually has probably improved the most). The other not so wise thing was not to keep the VAT (we call it sales tax so let's leave it at that - that would be an entirely separate discussion and could well be part of the budget gap) in sync. So Ireland kept it at 0 - by doing that pretty much invited all companies based outside of Ireland to go there - more or less build a tax shelter (it's called the commissionaire model and I don't want to explain this any further either - google it ...) to avoid paying taxes and still be able to repatriate profits to countries outside of the EU like Switzerland etc. So do I think that the EU is partially responsible for not keeping their members in check: Absolutely. Do I think that Greece deserves to be bailed out? Hmmm - by enforcing these austerity measures - yes. As you stated - they have lived way beyond their means and have gotten accustomed to entitlements.

I would like to point out other countries where entitlements are working and people are happy and have an economy which works and do have somewhat balanced budgets - pretty much every northern European country. So social unrest is more likely in countries where the government wasn't trusted much to begin with.

Vaguely remembering something Samuelson wrote in one of his books: A functioning government first has to protect personal property to allow an economy to prosper (please apologize but I'm rusty - was a while back when I had to lug those books around). If we trust the government not to take things away - we likely explore options to increase the value and/or add more to it. In a country like Greece the trust may not necessarily be there ...

picking up your last comment: I guess we both know that the majority of people doesn't save enough for retirement. SSI helps a bit but we would better to move to another mandated model (not government run) to ensure that in the long run we don't have all retirees on the street - may it be b/c of changes to the program or b/c they can't afford life. We are getting older (hopefully that stops soon) and the money won't last that far as you have well pointed out earlier. Forcing the workforce to contribute to a nest egg instead of hoping they will do it by 'offering' tax deferral/incentives is likely the better approach and takes pressure of SSI - again a model which has been enacted in other countries already.

Sorry for not having replied to an earlier post of yours - kinda missed that and think we have somewhat moved away from it. But I do like to raise an analogy to it: Even tax dollars do ultimatley trickle down - perfect example were the initiatives during the Great Depression, building the highway system etc. I agree that not all tax dollars do but infrastructure and eduction do (if you are well educated - the chances are pretty big that you have a decent paying job so your taxes will come back eventually .... among other things like the additional amount of disposable income etc.

John, I think I almost completely agree with your entire last post with one clarification of a previous statement,

SSI (i think should slowly, over the next 60 years or so, go completely away) BUT, if you want to keep the program, then re calibrate it to be the insurance it was first "sold" to the people as. So yes, government will keep that money if you die before you can get it. Sucks, but life, home, car, and health insurance works the same way. You pay a little to possibly need a lot.

I agree with everything else.

Nicholas, yes, even some tax dollars trickle back down. Easy to prove and I see it everyday, people on food stamps use the money to go buy food, drinks, alcohol, drugs, shoes, clothes, iPhones, computers, tv's....etc. so yes they are "helping" local business, kind of. I would argue that the government takes a dollar from X store, gives .20 to X person, and x person spends .05 back at X store, so it is not really helping local business, but that is a separate issue. The main point that you were referencing is that before the government gets that money to "trick back down", that money can benefit local businesses, communities, families, churches, and then again communities before it goes to the government, then it can "trickle back down". That was my point, both ways the government and the leeches get the same amount of money (and I would argue more revenue due to business growth and investment that is possible when you and I have more of our money in our wallets).

As for VAT, that is a possiblility and has been discussed frequently by some. I like the idea of a VAT but not the european model of a low percentage fed tax (2-3%). I am a huge supporter of a "fair tax". It would be the only tax in the whole nation. %21 sales tax (Fed gets 14% and states %7). No income tax, state or fed, no death tax, no capital gains, no property tax, no gas tax, no estate tax... etc. Certain things will be tax free... food, medical, baby necessities, etc. This would enable us to get rid of the IRS and the 100k government workers and their attorneys, save the citizens money on tax specialists, lawyers, audits, prevent everyone from cheating, using loopholes, hiding money overseas and elsewhere... and countless other benefits.

So now, if you make $50k a year, you take home $50k a year. You buy a $20K car, you pay $24,200 OTD before license and registration. $4,200 is paid in taxes. When you make $1M a year, you take home $1M. You buy a $250K car, you pay $302,500 OTD before license and registration. $52,500 is paid in taxes. That is the only fair way to tax us. This progressive tax system is confusing and complicated, it pits all the classes against each other benefitting only the politicians, over 60,000 pages of laws that the tax law makers in congress can not even understand, it is used to punish businesses and families, and takes up way too much of our time and money to deal with.

With the fair tax, the rich will pay more, the poor will pay less... fair. It will pull away a weapon that our politicians, lobbyists and special interests use to turn our attention off of valid political arguments and make us argue about who should be taxed at what rate. It will help create a stable and growing economy, will give the government the money it needs to protect us, and I can write that tax law on one page, instead of 60,000. On top of that, tax revenue will go up because collection is based on spending. Everybody spends their money eventually. The richer you are, the more money you spend. If you have a ton of money, you have resources that help you to hide and evade taxes, but you cannot hide and evade the tax charged POS (at point of service, aka: cash register). Collections, for the first time since taxes have been collected in the history of the world, would be at %100 and accurate. More money in our pockets equals greater trade at both higher volumes and rates, enriching everyones lives, including the government coughers.

I pray this will happen someday, but I know it is a losing battle.... way too much special interest is tied up in the way we are taxed.

Johnny, so basically you are advocating getting rid of our constitution and nationalizing state government? Holy cow!

We don't need to worry about those UN black helicopters with you on the case

No, I am a constitutional conservative/libertarian and believe in our constitution %100.

Which part of my statement(s) leads you to that conclusion? Is it my correct understanding of how SSI was set up to be successful, or my belief that the Fair Tax is fair and good for everybody (except politicians, lobbyists and special interest groups)?

The part about federalizing all taxes.

"It would be the only tax in the whole nation."

You currently pay ZERO federal taxes when you buy a car, for instance. Any tax is paid to the state. Same for property taxes, a component of gas taxes, a component of income taxes (not in NV tho!), a component of estate taxes, etc.

Originally Posted by joeshmoe

"you've already been schooled", "me and my family will be fine."

And why will you be fine? Because you have a big arsenal to protect your compound?
I would bet most people on this forum have chosen to be taxed at a higher rate. Do you live in a nice neighborhood which has higher taxes and good schools or do you live in a poor district where only the poor can live and the schools are not supported. People that can afford it CHOOSE the higher tax district with the better schools and probably a lot less crime. So, Sam I am, where do you live?

I live in a decent house in Detroit surrounded by other decent houses. I don't have a job because my union brothers were so well paid that my company couldn't afford to do business anymore. I am perfectly capable of working but why should I because I get welfare and get free money. We also try to have as many kids as possible, because the more we have the more money we get from the government. Plus when I'm on welfare I get free healthcare too.

I spend most of my money on hooch and lotto tickets. Sometimes me and my other welfare buddies like to sit on a park bench and cackle at people going to work. Sometimes I'll dress really shoddily and maybe people on their way home from work will give me more of their money.

I love not having any responsibility in my own life and would rather have the government make my decisions for me. I voted for Obama because he takes more money from those people I see going to work and makes more people like me.

So as long as we have socialist-minded people, I'll be fine.

We already have a federal income tax, then the states get some of that money back. Texas, for example, pays $2 for every $1 they receive from the government. We pay a lot in federal taxes. Fed Income, FICA, capital gains tax, death tax, payroll tax, estate tax... and there are more I am missing.

NV doesnt have income tax but gets its money from other ways, as well as money from the fed from all those aforementioned taxes. Sure, I buy a car in california and pay %8 sales tax with money that was already taxed %10 state income tax and %25 Fed income tax. You buy a car in NV and pay no sales tax, but you used money you already paid Fed income tax with. Fair tax would give you %100 of your earned income, tax you at %21 (that number is approx, forget what the exact is) when you buy your car in Nevada, then your state would get 1/3 of that sales tax (33%). The feds get theirs, NV gets theirs, and you get yours. win, win, win.

The constitution gives our central government the power to tax the citizens to raise funds for defense and a few other things, but nowhere does it say what channel it must or must not take to get them.

JD, your plan is very radical (and in some ways quite progressive). I'm not sure how you can't see that it would homogonize all states? How to collect taxes for local school boards, how to manage hunting and fishing (through paid licenses), etc. are all very local decisions. Whatever independence states now have in that regard would be wiped away.

(NV does have a sales tax, for the record)

Oh, sorrry, NV doesnt have state income tax, but does have sales tax? I should know that, I go to nevada a few times a year. Ok, scratch that part. As for "progressive", do you mean it in the political sense of being a "progressive" (wilson, FDR, mc'cain, pelosi, Hillary clinton...etc) ? or as in progressively steepening as is true with our current fed income tax system?

Local schools get their taxes from local sales tax, local property tax, local city and county taxes, some state tax and some from fed tax (like from texas, they give more out than they receive). It is all a shell game. Our reps go to washington (or to your state capitol) and sign bills and do "favors" in order to get more money sent their way so that you will think they are doing a good job and re-elect them so they can continue being the career-politician they are. If you get rid of all that, the local sales tax (approx 1/3 of the approx %21 sales tax on purchase) will go to the city in which the purchase was made. That 1/3 is all theirs to do as they please, schools, public services and safety, roads, libraries, parks. It will be a lot more than a comprible %7 today because more people will be spending more money. Plus, if you want to get a fish and game license, the person that wants it will pay for it. That is not a tax. If a city wants to still charge certain fees to businesses, safety inspections, initial inspections, business licenses...etc, they can. They may not want to because businesses will go to cities that want their business for the sales tax and will cut all those business killing fees.

Local decisions would not be wiped away, they would become more important. Do you want your city to be a "bedroom community" and have no revenue and no services, or have a little bit of business, or a lot. These all have consequences, but they are the sole choice of the city and its community. The choice to move to another city based on schools and shopping and city fees would be more distinguishable than it is today.

It is not perfect, and there are some things that many may/will not like... but it is so much better than the system we have now. I am not a tax expert, but if you really want to look into it, go get the book "the fair tax" by neal boortz, I read this book and the fair tax 2 by the same guys. They break down the flaws and some of the problems... very few in their opinion. I do a disservice to them by trying to explain their idea, but their idea is a good one, imo.

Read them, then tear it apart, I would love to hear what you think of it.