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## blackjack17

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Reply # 1123878 7-Sep-2014 21:40

oxnsox: Tax System Explained in Beer

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 problem."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 realised 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 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 £1 as well.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 £2? 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 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 any more. In fact, they might start drinking 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

Now who's round is it ?????

No one is talking about increasing tax. This old chestnut didn't really add anything

Aside from that. Nobody has attacked the rich. Nz has a lower top tax rate than most (including australia).
Those in the top tax bracket are also best at minimizing their tax

## mudguard

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Reply # 1123881 7-Sep-2014 21:49

And cutting and pasting

I don't think there is any disagreement with the math involved in how tax cuts work (which is what the original email seems to be addressing). It seems the disagreement stems from the original author selecting only the math that supports the pro-tax cut aspect of the email.

So, in the hopes of ending this grotesque wealth-based Darwinism (i.e., survival of the wealthiest), I offer the other side of this economic coin in this first-time diary.

Suppose that every day, ten men go out for beer and they order 10 glasses of beer (or 120 ounces of beer). If they split up the beer the way that wealth is distributed in the U.S.A, it would go something like this:

The first five men (the poorest) would get a sip of beer each or 0.672 ounces.
The next four men would get a small glass of beer each or 8.22 ounces.
The tenth man (the richest) would get 7 glasses of beer or 83.76 ounces.

The ten men went to the bar every day and the tenth man seemed quite happy with the arrangement, until one day, the owner threw them a curve. "Inflationary pressures are rising," he said, "I'm going to reduce the amount of your daily beer by 20 ounces. You will now receive 10 glasses of 10-ounces each, or 100 ounces total."

The group still wanted to split up the beer the way that wealth is distributed in the U.S.A. How could they divide the loss of 20 ounces of beer so that everyone would lose his 'fair share?' They realized that 20 ounces divided by ten is 2 ounces.

But if they subtracted that from everybody's share, then the first five men would have to pay the bartender 1.328 ounces of beer each. So, they decided to only take 0.672 ounces of beer from each of the first 5 men and take the remaining 16.64 ounces from the remaining 5 men.

Each of the first five men would give up the sip of beer (0.672 ounces) that they received (a loss of 100%).
Each of the sixth, seventh, eighth, and ninth men would give up 1.17 ounces each (a loss of 14.2%).
The tenth man would give up 11.95 ounces of beer (or a loss of 14.2%).

The result:

Each of the first five men would receive no beer.
Each of the next four men would receive 7.05 ounces.
The tenth man would receive 71.81 ounces of beer.

Each of the first five was worse off than before, having lost all of their beer. The next 4 were worse off, since they no longer received a full 8-ounce glass of beer. The tenth man still received 71.81 ounces (~ a six-pack), and was still happy.

But once outside the restaurant, the men began to compare their losses.

The first five men said, "We lost a sip of beer each. We don't get beer any more."

"Well, we lost more than a quarter of our beer" said the next four men "It's unfair that you only lost a sip of beer. We lost twice as much as each of you did."

"Wait a minute!" yelled the tenth man. "I gave up a whole glass of beer! I gave up more than all of you combined!!! The poor get all the breaks! First, they get free beer, and then they complain when they lose their free beer! The middle class are always whining about everything because they're too dumb to get as much beer as I do."

The tenth man called security, and the first 5 men were told to leave the premises, since they could not afford to pay for any beer.

The next 4 men stood silently watching, not wanting to risk the loss of any of their remaining beer.

The tenth man got into his chaufferred limo and went home.

The next night the first five men didn't show up for drinks, so the remaining five sat down to have beers without them. But, they discovered something important.

The first five men didn't show up to:

harvest the grain and hopps to make the beer
drive the trucks to bring the beer to the bar
clean the beer glasses and sweep the floor of the bar
serve the beer
and, most importantly, work as the security guards to protect the tenth man and his beer

And that, boys and girls, journalists and college professors, wingnuts and supply-siders, big-c and little-c conservatives, is how wealth is distributed in the U.S.A. The people who have the most money get the most beer. Take too much "beer" from the poorest people, belittle them for being poor, and they just may not show up anymore to make and serve your beer.

statistics from http://www.faireconomy.org/...

Please remember:

There are three kinds of lies: lies, damned lies, and statistics.

However, let's continue this thought experiment:

Let's imagine that the above example happened in 1983. How would the 120 ounces of beer be divided in 1998?

The first four men would have their 0.672 ounces reduced to 0.159 ounces.
The fifth man would have his 0.672 ounces increased to 0.739 ounces.
The sixth man would have his 8.22 ounces increased to 9.04 ounces.
The seventh and eighth man would have his 8.22 ounces increased to 9.92 ounces.
The ninth man would have his 8.22 ounces increased to 10.17 ounces.
The tenth man would have his 83.76 ounces increased to 103.17 ounces.

Or, let's divide the 120 ounces of beer according to the share of total ownership of stocks, mutual funds, and retirement accounts (basically, as a share of the stock market):

The first 9 men would each receive 2.84 ounces.
The tenth man would receive 94.44 ounces.

The most frightening aspect of these statistics is that they are almost 10 years old

## mudguard

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Reply # 1123900 7-Sep-2014 21:54

Coming back to the original topic, Gareth Morgan discusses a universal allowance extensively in The Big Kahuna.

## MichaelNZ

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Reply # 1123902 7-Sep-2014 21:57

Personally, I think this idea has merits.

However, it's unlikely to fly because of governments sucking up to mature beneficaries (ie: those on Super)

Many within this demographic (especially those at the lower age range) have had things pretty easy -

1. No world wars

2. Cheap property and huge (untaxed) capital gains

3. Free tertiary eduaction

4. Government pension (which I doubt I will ever get) from age 60 to 65.

5. Free public transport

and now they expect to be kept (in ever increasing numbers) by people in their productive years.

Paula "Benefit" Bennett treats unemployed people like dirt while the National party sucks up to their senior voter base - many of whom who have the audacity to tut tut about "dole bludgers" all the while they are among the biggest group of "bludgers" there are.

And what will they return to us for keeping them for 20-30 years? Nothing. When they pass their estate gets passed on to the next generation in it's entireity because there is no death taxes.

## oxnsox

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Reply # 1123905 7-Sep-2014 22:02

kiwirock:
oxnsox: Tax System Explained in Beer

Great example of something not sustainable.

To the home brewer who doesn't go to the bar, at home, that has the right ingredients and is capable of reproducing the ingredients on his own land also drinks for free. Under the current economic wealth mreasurement (GDP), this man would be making no growth as resources aren't being depleted or created in greater quanties than the year before. Sustainability is not economic growth. But to this home brewer on his farm, his prosperity of free beer doesn't require economic growth. That's something the tenth man can't understand cause he thinks without him there is no prosperity acorrding to his way of measuring. The tenth's man's rational is flawed and enforced upon the masses. Mr home brewer still couldn't care less and drinks his flat-lining beer production every year.

Ultimately, nothing is sustainable
it's just a matter of time.

## mattwnz

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Reply # 1123907 7-Sep-2014 22:08

macuser:
mattwnz:
macuser:

Then there is no incentive to save.

Isn't there already no incentive to save already?

You get super even if you continue to work full time, that's ridiculous.

It shouldn't just be based on income testing, it should be also based on the physical ability to work.

For people living to 90, in their life time, they have probably spent about 45-48 years being unproductive in society.

(School/University + Retirement). So for half of their life, they have not being producing anything.

All true. Some people though will work in voluntary work which is effectively saving taxpayers money in those areas of society that replies on that. Some will also work low paid / low stress minimum wage jobs after retirement just for something to do, such as in hardware stores, so effectively the tax payer are subsidizing those businesses who pay minimum page.

## Geektastic

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Reply # 1123931 7-Sep-2014 23:04

blackjack17: With all the talk of minimum wage and cost of living it reminded me of the minimum basic income idea.

The idea that we do away with all benefits, unemployment, dpb, student allowances, pension, WFF, sickness etc and simply give every man, woman and child (children's income could be based on age) a basic income.

You are free to live solely off this if you want, however if you want more you have to work.   If you do choose to work you don't lose your basic income.  If you don't wish to receive this money then you are free to donate it.

Roughly we spend nearly 30 billion a year on welfare and housing,

There are 4.5 million NZers and lets say 4 million of them are citizens, there are about 800,000 NZers below 15 which say for arguments sake are eligible for a half basic income.

This means that if we spend that 30 billion out every NZer gets roughly \$8000 a year (\$160 a week), which isn't much but enough to live on esp outside of the major cities.

The advantages that I see is

• the almost elimination of benefit fraud
• a universal safety net
• on going maternity leave
• dramatic reduction of government administration
• potential to get high income individuals to donate their basic income
• stimulus for the provinces
• an overall fairer system

While I can't see NZ doing something like this anytime soon, I do think something like this will be needed with changes in technology employment.

And if everyone decides to live on the \$8000, what do we do to fund it?

## Geektastic

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Reply # 1123932 7-Sep-2014 23:08

Kyanar:
KiwiNZ: These threads at first make laugh and angry at the same time then realise its all fantasy.

The Campbell Live poverty thread makes me feel more stabby than this one.  Far Right wing ideals outright offend me.

Left wing ones offend me.

## Aredwood

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Reply # 1123935 7-Sep-2014 23:10
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I fully agree with this min basic income system (aka the big kahuna). As it will solve the welfare trap problem. No more issues with people being on welfare because they are financially better off not working. As even if they can only work 10 hours per week for min wage, they will still be better off than not working. So it makes it easy to enter the workforce.

## Geektastic

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Reply # 1123937 7-Sep-2014 23:12

If you want to cut state pensions, you need to make saving for your own pension attractive.

NZ - unlike many countries - has no tax exemptions on saving for your pension.

Make it so that if people put say  \$20,000 a year in a private pension then the IRD takes no tax on that and gives credit for tax payable on the income earned within the pension scheme and perhaps people might consider actually saving for their retirements.

## Geektastic

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Reply # 1123938 7-Sep-2014 23:14

Aredwood: I fully agree with this min basic income system (aka the big kahuna). As it will solve the welfare trap problem. No more issues with people being on welfare because they are financially better off not working. As even if they can only work 10 hours per week for min wage, they will still be better off than not working. So it makes it easy to enter the workforce.

I'd solve it by taking all benefits away.

That has a way of motivating people to get work like nothing else.

If you have no option but to work at something - anything - or end up getting fed by the state (no money - just basic food) most people will get with it fairly quickly.

## kiwirock

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Reply # 1123939 7-Sep-2014 23:15

Nothing is sustainable? I was talking realtively not absolute. As long as I can brew my beer for the years of my life or until I choose not to, that's sustainable.

What do we do to fund it? Who knows... money is just an idea we give power too. How we use it and what we use it for can be changed whenever we want. We can use the distribution or creation of it to better everyone, or only a few.

## Geektastic

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Reply # 1123940 7-Sep-2014 23:19

kiwirock: Nothing is sustainable? I was talking realtively not absolute. As long as I can brew my beer for the years of my life or until I choose not to, that's sustainable.

What do we do to fund it? Who knows... money is just an idea we give power too. How we use it and what we use it for can be changed whenever we want. We can use the distribution or creation of it to better everyone, or only a few.

Well, how can you give anyone an income of \$8000 a year if you can't even decide what money is?!

NZ is a nation in the world, not a hippy commune in the Pacific.

## kiwirock

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Reply # 1123945 7-Sep-2014 23:57

Geektastic:
Aredwood: I fully agree with this min basic income system (aka the big kahuna). As it will solve the welfare trap problem. No more issues with people being on welfare because they are financially better off not working. As even if they can only work 10 hours per week for min wage, they will still be better off than not working. So it makes it easy to enter the workforce.

I'd solve it by taking all benefits away.

That has a way of motivating people to get work like nothing else.

If you have no option but to work at something - anything - or end up getting fed by the state (no money - just basic food) most people will get with it fairly quickly.

Hmmm a conundrum.

Judging by the get tough attitude, we'd be talking about pinishment and fear job applications not passionate and interest driven people.

I wouldn't be hiring anyone that wants to work for me because he's motivated by starvation. I fear it would come back to bite me in the a\$\$ hiring someone that took that kind of motivation to want to work.

Are all unemployed people extremely lazy? If so keep them. If not, then I doubt it would have a big impact on the few that give the rest a generalised stigma.

## charsleysa

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Reply # 1123950 7-Sep-2014 23:58
One person supports this post

I think when looking at these kinds of problems we have to think about a few fundamentals such as:

People are just numbers, they need food, water and shelter to survive.

The economy requires people to spend money.

Our largest portion or spenders and the low and middle income earners.

Now with these few fundamentals we can draw a conclusion that if our lowest earners do not have enough money left over to spend on luxuries then our economy isn't going to benefit and the situation is only going to get worse.

A government intervention of simply raising the minimum wage to a level at which low income earners will be left with enough money to spend on a couple of luxuries will improve the economy.

This conclusion is supported by the spending to growth relationship of economies most notably seen to stifle when people hoard (save) their money and don't spend it but also when they spend too much money they don't have (unrepayable loans and such).

There are concerns that raising the minimum wage can cause businesses to fail, well this isn't the case when we observe other countries including Australia where the minimum wage is \$16.87 and even that is still considered to be too low.

While I do think that those who work hard and earn extremely high are entitled to do so for their hard work, there is a point at which your income becomes disposable funds which are just being hoarded.

We need to rethink what we consider to be a high income because that is currently \$70,000 and even that is too low for a family of 6 with mortgage and such.

In order to create wealth you must stifle wealth. What I mean is in order for the low income to become higher earners you must change the distribution of wealth so that the distribution of wealth more closely matches the distribution of who spends the most money.

At the moment those who spend the most money in this economy are those who earn the least.

Regards
Stefan Andres Charsley

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