The Tax System Explained in Lunch

Categories: PoliticsWisdomHumor

Suppose that every day, ten men go out for lunch 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 ate lunch in the restaurant 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 lunch by $20.00."  So lunch 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 eat for free.  But what about the other six men?  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 eat his lunch.

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% off).
  • The sixth now paid $2 instead of $3 (33% off).
  • The seventh now paid $5 instead of $7 (28% off).
  • The eighth now paid $9 instead of $12 (25% off).
  • The ninth now paid $14 instead of $18 (22% off).
  • The tenth now paid $49 instead of $59 (16% off).

Each of the six was better off than before.  And the first four continued to eat lunch for free.  But, once outside the bar, the men began to compare the amount they got off.

The sixth man said, "I only got $1 off out of the $20 while the tenth man got $10 off!"

"Yeah, that's right," exclaimed the fifth man.  "I only got $1 off, 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 off, 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 told him they they were angry that he got so much off while they each got very little.

The next day the tenth man didn't show up for lunch, so the nine sat down and had their lunchs without him.  But when it came time to pay the bill, they discovered something important.  They didn't have enough money amongst all of them for even half of the bill!

And that is how our tax system works.  The people who already pay the highest taxes will naturally get the largest 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 eating 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.

User Comments:
Seth - Dec 18, 2011 11:46:30 — This analogy overlooks one parallel. The bottom 3 of 4 wage earners get money directly from the top producers. Something like "earned income credit?" Look at the tax forms. There are people who not only don't pay taxes, but get a check larger than their withholding.
Jonas - Dec 18, 2011 11:58:57 — Yes, you are absolutely right!  I helped a friend prepare her taxes last year.  She sent the IRS a $70 check, but received a $400 refund check in return, well over the amount withheld.  In her case, she had only worked part-time, but considering the millions of people in this boat, it adds up.

taxable kickbacks - Apr 10, 2013 04:19:31 — The IRS should tax frequent flyer miles and other affinity programs. Any politician that has signed up to any affinity program should be obligated to abstain from voting and/or lobbying.
Jonas - Apr 10, 2013 08:40:15 — Thanks for writing, taxable kickbacks, but I gotta disagree 100%.  The IRS doesn't tax, they only collect.  Congress taxes, and they're not going to tax themselves.

The U.S. government has ten times more revenue than it needs.  Congress needs to STOP taxing us more.  The income tax rate, if we must have one, should be 3% to 7% for everyone - rich and poor.  The same tax rate should apply to everyone since "all men are created equal", and that we expect that all men and women should be treated equally and fairly by our government.  Congress needs to stop taxing some people for this and other people for that, and get back to a simple system that applies to everyone, and that everyone can understand and afford.  The government's obligation then is to spend responsibly.  Sadly, it's never going to happen as long as Americans continue voting for Republicans and Democrats.

Regarding the second statement, there's a simpler solution.  The voters could simply vote the bad apples out.  Unfortunately, they're all too busy with their smart phones and iPads to bother with what's going on in the political world.

Thanks again for visiting the site!
Joan - May 28, 2014 05:53:37 — I wish all people could see and understand this princepal. Iam sick of the those and us attitude. The rich get richer and the poor get poorer
Juno - May 28, 2014 09:07:18 — This is Brilliant, Max. It's amazing how your points come across so effortlessly. If anyone else wrote this, no one would get it. Really a great piece!
Jonas - May 29, 2014 12:42:36 — Thanks for visiting and for the comment, Joan.  But don't forget that without pain, we wouldn't know what pleasure is.  Without hatred, we wouldn't know what love is.  Without bad, we wouldn't know what good is.  And without them, we wouldn't know who we are.  But I have to disagree on one point.  The poor will never get poorer.  The poorest one can get is to have nothing.  You can't have less than nothing.  So the bottom end of the scale is always 0.  Yes, the rich get richer.  I would hope that of the 50+ years I've been working my tail off to get richer, the government won't come along and ruin all that hard work for me, giving my earnings to those who don't work as hard.  I'm far from rich, but I want that opportunity.  And if I were to get rich, I expect I will want to be even richer.  The best thing about having more is that you can give more to others.  I'll always be grateful to those rich bastards who have employed me for all these decades.  I helped them get rich, but without them, I would have nothing.  That's true for just about anyone who works for a living.  Thanks again!

Juno, sorry to disappoint you, but I'm not the author.  I don't know who is.  It was just one of those emails that was circulating around for a while, and I got it and posted it here.  But, yeah, it is brilliant, and makes the point very well.
denmoy - Jan 31, 2016 09:53:01 — "You don't make the poor richer, by making the rich poorer." - Winston Churchill
Cathie - Apr 28, 2016 06:49:13 — Joan, let me guess. You are in the poorer faction of the population? Check out Obamacare... The reason it's not working is there are not enough people paying high enough premiums to pay for the medical care of the people utilizing the program. It will never work actually. The ratios of payers to users will never be in its favor. If we all sit around not achieving but rather eating Doritos and sitting on our couches, who will be left to pay for it?
Tax Prof - Oct 15, 2016 10:41:09 — An interesting point here is that even with a reduction in the bill, everyone gets upset. What happens when the owner raises his prices so the lunch costs $120?
Jonas - Oct 15, 2016 11:53:32 — Here's the bottom line:

Is the lunch worth $2?  If yes, great!
Is the lunch worth $49?  If no, apologize to your friends, excuse yourself, and go somewhere else.
Dave - Nov 11, 2016 10:58:00 — Meanwhile the poorest four go home to their trailers, apartments, or are homeless. the next group goes home to their modest home in the suburbs. One may go home to their luxury home or condominium. And the 10th gets in his Leer Jet and flies to Bermuda for the evening and complains about paying high taxes. This is the most ridiculous thing I've ever seen.
Janet - Jan 30, 2017 08:48:19 — I think this perfectly sums up the problem. I am amazed at the people who feel they are entitled to receive money the have not worked for nor even desire to try and earn. As a single parent I was often told I should quit my job and go on welfare. This was said to me by teacheers, a lot of other parents, my boss, other co- workers, some of my friends and even some relatives. Welfare is a stop gap measure to help you get on your feet not a way of life.
Stephen - May 10, 2017 01:53:00 —  Too true- this theiry rocks
Larry - Sep 27, 2017 03:24:30 — Wish you would post this on Facebook!!!!
Jonas - Sep 29, 2017 01:11:20 — I stopped using facebook years ago when they announced they would be selling our telephone numbers. Mark Zuckerberg is a true enemy of the American people.
Dave - Oct 31, 2017 08:45:23 — This is a crazy bad example. It assumes everyone enjoyed the same meal. For taxes we only tax a portion of your income. So if you make nothing you pay nothing. Most high income earners are hard working or smart individuals. That being said, without the infrastructure of the USA it would be very difficult to reproduce that income. Defense, law enforcement, legal system, roads, postal service, it all contributes to the success of everyone. Those who benefit the most are asked to pay the most. Anyone can suggest a better way to do it feel free to convince me.
Dave - Oct 31, 2017 08:55:16 — This is a crazy bad example. It assumes everyone enjoyed the same meal. For taxes we only tax a portion of your income. So if you make nothing you pay nothing. Most high income earners are hard working or smart individuals. That being said, without the infrastructure of the USA it would be very difficult to reproduce that income. Defense, law enforcement, legal system, roads, postal service, it all contributes to the success of everyone. Those who benefit the most are asked to pay the most. Anyone can suggest a better way to do it feel free to convince me.
Jonas - Nov 1, 2017 12:22:27 — A better way... that's easy.

Since "it all contributes to the success of everyone," let's each pay an equal flat dollar amount.  What could be more fair?  The problems in America are that 1) not everyone can afford to pay, and 2) Democrats want everyone else to pay.

So the compromise was that everyone pay a percentage of their income.  Unfortunately, Democrats still want everyone else to pay.  So we end up taxing those who earn more with higher percentages while more and more lower income Americans get a free ride.

It is NEVER fair to tax someone more simply because he/she has more to take.
Kyle - Dec 21, 2017 02:34:22 — Interesting points, however, I would like to ask. How does the owner make up the lost of $20.00? Does he has to cut back on food quality and quantity? So say, the restaurant owner cut back on the food quality to cover the lost income. Everyone in the group will suffer from malnutrition. In this scenario, the only ones who can afford more food are the people who were paying. The ones who were unable to pay will continue to suffer from malnutrition (the first four men). Over the period of time, they will be sick, weaken, and unable to continue working, thus unable to contribute. These people makes up the base of the work force, they are the people who does the production, as oppose of the tenth man, who is likely in management. If the first four men are unable to produce, the tenth man will have nothing to sell. In this scenario, the reduce cost, while sounding like a good deal at first, will have a negative effect on everyone in the long run. For those who understand, no explanation is needed. For those who do not understand, no explanation is possible
Donald and Peggy - Dec 23, 2017 06:18:17 — Thank you for publishing, love love love this.
snert - Mar 7, 2020 12:02:12 — the only thing i'd change about the tax system, is the loopholes, and congress will never agree!!!
snert - Mar 7, 2020 12:09:52 — a remark to kyle...the owner won't lose anything, and most likely make even more. by giving a discount he most likely will gain loyal customers who'll most likely spread the word...thats what you call a smart businessman!!!
Jonas - Mar 7, 2020 05:34:46 — Kyle, there is no $20 'loss'.  The owner is simply lowering his prices for this group, as a reward for their continuing patronage.  Generally, lower prices attract more customers, but that's irrelevant in this case.  The discount is only being offered to the men in this group, not to the general public.  So this is not a marketing tactic in an effort to attract more customers.  There is, of course, a balance between low prices/more customers vs. higher prices/fewer customers, and there's nothing to suggest that this business owner has not found that balance.  You've completely fabricated a story with a doomsday (liberal) mentality.  You are clearly not a business owner (or if you are, you won't be for long).  Thanks for visiting (sorry for the delay)!
Jonas - Mar 22, 2020 12:52:40 — The American people will NEVER be truly "free" until they have the power to choose, through referendum, their own tax rates and tax increases.  None of this "representation" crap!  Anytime you let someone else control your money, it will always end up bad.  So how much should we pay?  Everybody pays the same amount.  Not the same percentage of income.  The same amount.  $400 a year should be enough.  Almost everybody should be able to afford that.  If not, we can have provisions for those who can't afford to pay that amount, such as the homeless.  Otherwise, EVERYBODY pays!  We're all offered the same basic government services, such as defense.  So we all pay the same amount.  And for those of you who think the government can solve all the world's problems, we can add a voluntary tax on top of the $400 mandatory tax.  You can donate any amount you want - OF YOUR OWN MONEY - to go to any agency or program you want.  Sort of an "asset allocation" type system where you can allocate your voluntary tax donation dollars to contribute to whichever agencies or programs you feel are important.  If you want to pay billions of dollars to send a guinea pig to Mars, you can allocation x percent of your voluntary tax dollars to NASA.  You think it's a good idea for the fed's to control education, then allocate another x percent to the Department of Education.  You think the world's gonna end in 12 years due to rising sea levels, then give everything you have to fight climate change.  Knock yourself out!  I can guarantee that most, if not all, of those programs will shut down very quickly 'cause nobody really wants them unless other people foot the bill.  That's how our current tax system works - always trying to find other people to pay for everything.  (You can thank me later.)

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