The Tax System Explained – Using A Beer Analogy.
Suppose that once a week, ten men go out for beers, and the bill for all ten, at the end of the night, comes to £100 (I know, these days that’s not even 2 pints each – the figures are just there to make the point).
If they paid their bill the way we pay our taxes (i.e. depending on each man’s income or net-worth) it would go something like this…
- The first four men (the poorest) would pay nothing.
- The fifth man would pay £1.
- The sixth would pay £3.
- The seventh would pay £7.
- The eighth would pay £12.
- The ninth would pay £18.
- And the tenth man (the richest) would pay £59.
So, that’s what they decided to do.
The ten men drank in the bar every week and seemed quite happy with the arrangement until, one day, the landlord caused them a little problem. “Since you are all such good customers,” he said, “I’m going to reduce the cost of your weekly 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 not only would the first four men still be drinking for free, but the fifth and sixth man would each end up being paid to drink his beer.
So, the landlord came up with the idea that it would be fairer to reduce each man’s bill by a percentage. They decided 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 (a 100% saving).
- The sixth man now paid £2 instead of £3 (a 33% saving).
- The seventh man now paid £5 instead of £7 (a 28% saving).
- The eighth man now paid £9 instead of £12 (a 25% saving).
- The ninth man now paid £14 instead of £18 (a 22% saving).
- And the tenth man now paid £49 instead of £59 (a 16% saving).
Each of the last six was better off than before, with the first four continuing to drink for free as before.
Cue – Meltdown.
“Oi! I only saved a quid, but he saved ten!” whinges the sixth man.
“That’s not fair!” moans the seventh.
“This is outrageous! The rich get all the breaks!” cry the rest, clutching their warm pints like it’s a Marxist support group.
The first four, who still pay absolutely jack shit, suddenly pipe up: “This whole system exploits the poor!”
So, what do they do? They all jump the rich bloke in the car park and kick seven shades of shit out of him for being successful.
The next week, 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 to pay for even half of the bill!
And that, boys and girls, journalists, government ministers and my dear Mooselings, is your British tax system in a pint glass. Hammer the people who actually pay for the round, and don’t be surprised when they bugger off to Dubai, Monaco, or anywhere they don’t have to fund Karen’s “free yoga for the unemployed” scheme.
But at least everyone’s equal now. Aren’t they?
For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible.
