Who is going to pay the bill?

I received this from a friend via email. You may have read it long ago (since email stories go round and round), but i think it is worth  reading it again and get the gist of the meaning at this stage.

It is written by a professor in US (David R. Kamerschen, Ph.D. Professor of Economics, University of Georgia) but is applicable to most tax system in the world.

In the Malaysian context, it is especially relevant not only to our tax  system but our economic policies as well.  In Malaysia, Idris Jala has mentioned that one million people pay tax, out of our population of 27 millions.

If we chase away the tax payers (brain drain may have such an effect), and we run out of oil and gas, then who is going to foot the bill??

This is it: 

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 did!’

‘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, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

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18 Comments (+add yours?)

  1. monsterball
    Jun 29, 2011 @ 11:24:59

    hahaahahahaha…..The cat is out of the bag.
    This is a good one for Najib to read.

    Like

  2. Dr Hsu
    Jun 29, 2011 @ 11:38:46

    Three children were playing in a beach around a big sand castle built by an earlier visitor. They were playing happily until when suddenly one of them brought out the issue of who should own the castle.

    The youngest one said he wanted more share of the castle , since he is youngest . The second one said that he should get the bigger share since he is not the oldest nor the youngest. The eldest said he wanted the biggest share since he is the oldest and Big Brother.

    The three then shouted and fought each other. In the melee, all of them fell onto the sand castle, and the sand castle was leveled.

    Now, instead of being happy playing around the sand castle, they have only enmity and anger in their hearts….

    Get the Gist ?

    Like

  3. Kenny
    Jun 29, 2011 @ 11:51:39

    Chasing away the most productive citizens affect the ability of the govt to sustain bumiputra privileges. What Ibr. Ali and his ilk are doing is killing the goose that lays the golden eggs. The govt cannot give anybody something for free without taking it for free from another someone else. For example the discounted price of houses for bumis are subsidized by other races.

    Like

  4. monsterball
    Jun 29, 2011 @ 13:10:47

    Think about this!!
    Where did PR get their millions to stand for elections?
    From well wishers…philanthropist…or from a foreign government.
    The point is…they never strole one sen from Malaysians….yet have millions.
    Where did BN and particularly UMNO B get their billions….yes billions..not millions….for they spend lavishly on elections….big and small.
    Again…not from their RM1 per month membership fees nor all their salaries donated for their cause can add up to so much.
    Najib will make sure all Malaysians know if their billions are given by well wishers and others..to prove they never steal.
    PR gets lots of donations.
    BN got none. Only steal and steal from Malaysians..which they keep on denying.
    Who is more trustworthy?

    Like

  5. monsterball
    Jun 29, 2011 @ 13:20:56

    Dreaming and building castles in the aie.. on sand…thinking they real castles. Malaysia all built by them…hired by Malysians.
    And after building it…these idiots say they belong to them.
    Can you imagine a contractor hired to build a castle..and after building it…says it belongs to him and not the hirer who foot out the money?
    Fools think the are Kings of the Road.
    These servants elected to manage our country have gone too far.

    Like

  6. SON OF MUHAMMAD
    Jun 29, 2011 @ 14:18:54

    NOT ONLY BUMIS ENJOY DISCOUNTED PRICES OF HOUSES. EVEN THE PLAY
    GROUND AND THE SURAUS ARE BEING PAID BY NON BUMI HOUSE BUYERS.
    I AM NOT SURE IF THE UMNO B WILL DECLARE THESE SURAUS HARAM AS BEER MADE IN SAUDI ARABIA FOR THE MUSLIMS ARE DECLARED HARAM
    HERE IN MALAYSIA. LOOKS LIKE THE UMNO B ARE A LOT MORE HOLIER THAN THE ARABS. ALL ARE HARAM EXCEPT THE UMNO B SWINDLING THE RAAYAT
    ARE NOT HARAM. IN ACTUAL FACT THERE IS NO SUCH THING AS HARAM EXCEPT THE WHOLE LOT OF UMNO B AND ibrahin aguli ARE HARAM. NO NEED
    TO TALK MUCH, JUST ASK ANY 3 YEAR OLD NON MUSLIM KIDS WHAT ia LOOKS
    LIKE AND YOU KNOW THE ANSWER. BUT ASK THE MUSLIMS THEY CANNOT
    TELL COS THE PICTURE OF AN ANIMAL HAS BEEN CONVERTED TO A CHINESE
    CHARACTER. GOD BLESS YOU UMNO B AND ia!

    Like

  7. CYC
    Jun 29, 2011 @ 17:11:18

    Malaysia’s total debts just went up another 20billions according to BNM’s latest 2011Q1 report. Why increase and where the money gone to? Missing in between the many Corridors or drained off into somebody’s purse?

    Blame in on some scapegoats just like what the Greeks are doing now. Continue to enjoy life and demand to work only less than 30 hours a week. We shall see them in Hell very soon.

    Like

  8. A true Malaysian
    Jun 29, 2011 @ 23:21:29

    They will not look at figures.
    They look at ‘beer’.
    They say, beer is haram.
    But hard cash from selling beer is halal.

    It’s nice if they see money from tax is haram.
    That they will never do.

    Like

  9. KeyStone
    Jun 30, 2011 @ 06:22:15

    The reality does not work same way as the Bar Stool Model.
    The ones get taxed most are the honest guys.
    The richest guys have tax accountants and lawyers to help them to avoid taxation.
    The poor guys pay little tax.
    The honest middle income guys got taxed the most.
    GE is one of the biggest company in USA ( Next time you fly, take a look at the jet engines attached to the wings of the plane, 50% of them are made by GE.) and GE did not pay a single cent of tax in 2010. In 2009, US government rebate tax to GE in the tune of millions.
    That is why the honest guys go to church every Sunday to pray for Jesus to come to relieve them from their suffering. Of course, the dishonest ones already found their destination.

    Like

  10. CYC
    Jun 30, 2011 @ 10:12:21

    “Be the feeling machine that thinks, but not the thinking machine that feels.” All elitists should ponder on the above sentence when examine why they failed to address the worldly problems though equipped with intelligence and knowledge.

    Like

  11. anomie
    Jun 30, 2011 @ 10:40:45

    Haram? Halal?

    Anyone realise that the biggest promoters of the pornography industries in the world r

    1) Visa & Master card
    2) internet search engines like Yahoo & Google
    3) International Hotel chains

    How? Think-lah !

    Like

  12. Phua Kai Lit
    Jun 30, 2011 @ 11:02:29

    Like

  13. chabalang
    Jun 30, 2011 @ 15:33:17

    The following comment is not meant to be racial but rather factual. I was just commenting to my wife…that the current situation of non-Bumi cross-subsidising (paying more taxes) the Bumi population is just not sustainable in the long run because of the shrinking non-Bumi population. The ratio of non-Bumi to Bumi population in M’sia has been declining since 1957, you can imagine how can long can the cross-subsidising last?

    Like

  14. monsterball
    Jun 30, 2011 @ 16:40:03

    Cows get mad seeing red.
    Government get mad seeing yellow.
    Who is afraid of the big bad wolf…..no one.
    BERSIH walk is on….and we are painting the city will a sea of yellow colors ..to make sure Govt know People Power is alive and well.
    Najib told Sabahans…election is around the corner.
    He knows..the longer he delays…the worst result for him to be.
    72% supports him…so said Najib…yet dare not have 13th GE.
    When comes a bigger liar?

    Like

  15. Kenny
    Jul 01, 2011 @ 12:03:49

    Gopeng MP Dr Lee Boon Chye was arrested at at Ipoh wet market just for wearing a yellow T-shirt (not a Bersih T-shirt). The police also handcuffed him in public before placing him in the police truck. What is this country coming to?

    Quote from malaysiakini:
    “I did not wear a Bersih T-shirt, it was a T-shirt, but in yellow colour.

    “I just arrived at the market and started to shake hands with voters, then they arrested me,” he said when contacted, adding that he did not distribute leaflets, nor did he have a banner at that time.

    Police also refused Lee’s request to attend to his patients at the hospital. Lee is a practicing cardiologist.

    unquote……………

    This disgusting action of the police will help to make the country poor. The only way to correct this bad situation is to kick out BN and you’ll see the police behave under a new PR govt.

    Like

  16. CYC
    Jul 01, 2011 @ 16:28:24

    Desperado acts by desperate men. Its a game point situation for these bunch of born losers.

    Like

  17. CYC
    Jul 01, 2011 @ 17:25:12

    I declare BN an illegal political party to vote for in my present and next, and next , and next….. life. Period.

    Like

  18. klm
    Jul 02, 2011 @ 10:19:31

    I feel creative this morning. Enjoy my rhyme.

    The turds of Putrajaya
    Yellow colour is their paranoia
    Bovine spongiform encephalopathy
    And acute peripheral neuropathy

    Irrational illogical and emotional action
    Yellow drives the police to distraction
    Kerimuddin frothing in the mouth
    His sanity is going down south

    Silent, quiet and out of his mind
    Jibby is all entwined
    His govt is running wild
    The turds all felt so defiled

    Like

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