Friday, April 16, 2010
UK tax system explained through beer
The Tax system, explained in beer. Suppose that every day, ten men go out for a 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 of you 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 percentage 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 pound 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 pound too. It's unfair that he got ten times more than I!"
"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.
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.
Tuesday, February 23, 2010
BA cabin crew vote for strikes
One has to ask, what is it that the cabin crew do, that makes them think they are entitled to these enormous salaries and benefits. If the pilot and co-pilot die will they fly the plane? If there is a medical emergency on the plane will they make the diagnosis? If the plane has a mechanical fault will they strip the engine and rebuild it? Whether you have 15 minutes or 15 years of "experience", cabin crew remain, simply waitresses, albeit with the ability, thankfully untested, to stay calm in crisis and read the crisis instructions. Some may find this insulting but it will not stop it from being true. You get paid for the skills you bring to the job. In the case of the BA Cabin crew, they can't even bring a smile. (By the way I have taken over 250 flights in the last 5 years and BA is Ryanair without the cheap ticket. Only when there is simply no option am I forced to buy BA). Take Control. Fire everyone. Sell everything. Slots, planes, assets including the brand. Fill the hole in the pensions with the money. Pay what’s left to the debt and equity holders. Put the pension in trust and be done with it. This Union doesn't deserve to carry our flag.
Wednesday, February 10, 2010
Should we send aid to Zimbabwe?
The past has been used to justify many things, no doubt the guardian readers of the world will see this current act of stupidity as just desserts for the crimes of past generations of white colonialism, but the reality is that this will temporarily enrich a few corrupt politicians and rapidly destroy what little is left of the economy. It happened in Uganda when Idi Amin did it. This appropriation already happened with the farms and a country that used to feed it's neighbours teeters on the brink of starvation. Who is going to invest in Zimbabwe now?