Taxes, Taxes, Oh Where Do My Taxes Go?

I got a kick out of these two jokes/analogies about taxes & the economic stimulus package.

The Economic Stimulus Package
This year, taxpayers will receive an Economic Stimulus Payment. This is a very exciting new program that I will explain using the Q and A format:

Q. What is an Economic Stimulus Payment?
A. It is money that the federal government will send to taxpayers.

Q. Where will the government get this money?
A. From taxpayers.

Q. So the government is giving me back my own money?
A. Only a smidgen.

Q. What is the purpose of this payment?
A. The plan is that you will use the money to purchase a high-definition TV set, thus stimulating the economy.

Q. But isn't that stimulating the economy of China ?
A. Shut up.


Below is some helpful advice on how to best help the US economy by spending your stimulus check wisely:

If you spend that money at Wal-Mart, all the money will go to China.
If you spend it on gasoline it will go to the Arabs.
If you purchase a computer it will go to India.
If you purchase fruit and vegetables it will go to Mexico, Honduras, and Guatemala
(unless you buy organic).
If you buy a car it will go to Japan.
If you purchase useless crap it will go to Taiwan.

And none of it will help the American economy.

We need to keep that money here in America.

You can keep the money in America by spending it at yard sales, going to a baseball game, or spend it on prostitutes, beer and wine (domestic ONLY), or tattoos, since those are the only businesses still in the US.

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Barstool 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 (poor) would pay nothing.
The second (poor) would pay nothing.
The third (poor) would pay nothing.
the fourth (poor) 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 first would still pay nothing.
The second would still pay nothing.
The third would still pay nothing.
The fourth would still pay nothing.
The fifth man 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!' 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.

by David R. Kamerschen, Ph.D.
Professor of Economics, University of Georgia