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Tax analogy

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 realised 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 pound 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 pound
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 any more.
In fact, they might start drinking overseas, where the atmosphere is
somewhat friendlier.

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