THINGS YOU WONT LEARN IN SCHOOL - Advice on Finance, Investments, Savings and Technology by Marin Anthony
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How Society Hates on the "Rich"

5/10/2015

 
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With the recent New Democrat victory in Alberta, the populace has spoken and it got me thinking.

Why do people hate the rich?

The perspective is that they make more than their fair share and others are paid much less. American CEO's make 331x more than their average worker according to Forbes.

Damn.

But when we think of the "rich", we think of fat cat bankers, investors, speculators, hedge fund managers, traders, etc…

We're so tarnished.

What about the NHL hockey players, the NFLers, rock legends like U2 and Bon Jovi? Shouldn't they be a a part of that image? My guess is that they're not.

Down with the rich bastards and capitalists the populace cries! In with the new era of regulation, distribution and higher taxes!

But below is a piece that really made me think...

I don't know who came up with this originally, but it's a story generally attributed to a professor of economics.

It's how our current tax system works based on each segment of our population...


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.


B Riding Dirty
5/10/2015 08:46:04 am

True. Well explained.

dirty debtor
5/11/2015 11:27:23 am

I think Canada strikes a good balance between Europe and USA on progressive taxation & public welfare.

Sure, the segment of socialist young people who dream of Nordic nations welfare systems is huge, but the vast majority of these kids cant be bothered to vote. By the time they can be bothered to vote, their tax brackets will be such that magically their political opinions will have changed.

The NDP win in AB surprised me, but i can't see it coming in federal. In AB the right had a split vote - federally the left will split it, leaving the conservatives with the lead again.


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