Scavenger writes:
It is interesting, as a self-employed craftsman just starting out, to figure just how much of the price for which you sell a hand-crafted item has to be set aside for taxes. It is interesting to then connect that with what those taxes pay for. It is then interesting to see what new things each session of Congress cooks up that taxes pay for. You then try not to think, as you pause to brush the sweat off your brow while hammering red hot iron into beautiful and useful items, how much of that sweat is going to various programs. It's not a good thing to do for your blood pressure or ease of digestion.
Probably the most useful item of information I learned in high school was the concept of TANSTAAFL. I learned this in one of my social studies classes, and I found out years later that that particular way of phrasing it was coined by Robert Heinlein. I am grateful to that teacher for teaching the concept. There Ain't No Such Thing As A Free Lunch. The segment of the population that feels they benefit from governmental spending does not see the whole picture. If you do not earn enough to pay taxes, why should you care? Well, who does pay those taxes? Where do they get the money to pay those taxes?
Let's take the example of a grocery store. Everyone has to eat. You pay the tax that the store owner pays to the government. The store pays the taxes that the supplier pays to the government. The supplier pays the taxes that the farmer pays to the government. The farmer pays the taxes that the diesel company pays to the government. And so on, ad infinitum. And so you, the end consumer, end up giving enough of your money to the store that all of the people in that long, long chain can pony up their portion to the government. Whether you pay an income tax or not.
How much of your efforts go to support what the government pays for? How many government salaries for the people that administer all the programs are you paying for? What could you do with some of the money that ends up going in that direction?
Do you want the government to do more? If so, it means that you, ultimately, do with less. Everyone, ultimately, does with less.
I, as an independent craftsman, sell items to people who have enough discretionary funds that they can afford to pay me for them. Nothing I sell is something of vital importance that cannot be done without or gotten by with something from a Communist Chinese factory. I make beautiful, durable goods that will outlast the original owner if treated well, but none of it is something that can't be done without. The less money that people have of their own to play with, the less inclined to buy a handcrafted, beautiful knife made with the sweat and ingenuity of an American they are and the more to buy something cheaper that will not do as well or last as long or feel as nice in the hand froma country with a lower standard of living and less freedom. The more I have to struggle to make it.
Just a thought as I set aside money for taxes late one Sunday evening, when our wonderful government has decided to take control of 20% of our economy to make sure that a small percentage of the population who does not have insurance has it whether they want to or not.
Well, America was nice while it lasted.
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ReplyDeleteBar Stool 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 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 their 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 paid $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 me!"
"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, University of Georgia
For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible.
TwitteringBird paleoplanet
That's a pretty good analogy, TwitteringBird. I've never been wealthy and never will, but I don't begrudge those who are. It ain't poor folk who are the engines of an economy.
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