Cocktails and Taxes - a must read for every bar and tavern owner as well as all wait staff personnel.

Not long ago ten boys graduated from High School; all 10 went to work at the local mill. As luck or faith would have it the boys qualified for different jobs. Their jobs ranged from Custodian to Sales, to Marketing and Machinists. All earned different wages.  

The years at the mill flew bye yet their friendship remained strong. When they turned 21 they began to meet on Thursday nights at a local bar after work. They’d talk about the old HS days, discuss how their families were doing and sip on several drinks. When the night ended their bar tab was typically $100.

Since there was such a difference in their pay they wanted to come up with a plan to pay their tab that was fair. The first four men (the lowest paid) were asked to pay nothing. The fifth man put in a $1.00 while the sixth man chipped in $3. The seventh laid down $7 and the eighth tossed in $12. The ninth kicked in $18 and the tenth man (the highest paid) coughed up the remaining $59.

For over two years, every Thursday, the men paid their bar tab with this arrangement and all seemed okay with it. Then one week the bar owner threw them a curve. He came to their table and said: “You boys are wonderful customers – from now on I’m going to reduce the cost of your bar tab by $20; so when you guys come in on Thursday night’s from now on you will only have to pay $80 instead of the regular $100.00.

Delighted with the owners kind offer the buddies agreed to still pay their bar tab on a sliding scale. The six payers now had to decide how to divide up the $20 reduction? They thought they would divide the $20 equally by the six payers a $3.33 savings per man. However when they went to subtract the $3.33 from each of their shares, the fifth and sixth both received money and that just didn’t seem right.

Seeing the dilemma he caused, the bar owner walked over and suggested they reduce their shares using the principles the Federal government applies to income taxes. The men listened and watched as the bar owner calculated what each man’s fair share should be using the US tax tables.

According to the owners calculations the fifth man, like the first four, would now pay nothing (a 100% savings). The sixth man would now only pay $2 instead of $3 (a 33% saving). The seventh man would now only pay $5 instead of $7 (a 28% saving) and the eighth man would now kick in $9 instead of $12 (a 25% saving). 

The ninth man would be asked to contribute $14 instead of $18 (a 22% saving) and the tenth man under the new system would only be responsible for $49 instead of $59 (a 16% saving). Proud of his solution the bar owner smiled as he believed the ten men were now off than before. 

After the men settled their tab they left the bar. However once outside they began to compare their savings. “Damn, I only got one dollar out of the $20,” declared the sixth man!” he then pointed to the tenth man and said” but he got a $10 savings!” 

“That’s right,” exclaimed the fifth man. “I too only save a dollar and it isn’t fair he gets a benefit ten times more than me!” “That’s true!” shouted the seventh man. “Why should he get $10 back, when I on get $2? I guess it’s true what they say the wealthiest always get all the breaks!”
Just then the first four men yelled out in unison, “Why are you guys complaining? Look at us; we didn’t get any savings from the $20.00. This system really sucks; we get nothing and he gets $10 - we are the ones being exploited!” The nine men were now so worked up that they surrounded the tenth man and beat him severely and left him in the street as they walked home.

The following Thursday night tenth man did not show up; however the other nine men still met, talked about HS their families, had fun and drank without him. Towards the end of the night the bar owner came over with their $80.00 bar tab. Quickly, the men realized they did not have enough money between the nine of them to cover even half the bill.

And that, boys and girls is the problem we face when someone wants to fix our tax system and reduce our taxes. Invariably the individuals who have the most are going to be the ones to get the greatest benefit from any reduction.

But remember - and this is very important - If we decide to tax the wealthy extra just for being wealthy they might decide not to show up on Thursday nights at the local tavern. In fact, they might start going overseas to atmosphere they find more friendlier.

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Thanks

Eba G.