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Beer and Taxes: The Truth

December 15, 2010

By now, many of you have read the Beer and Taxes “viral email” that’s been circulating. It tries to explain why the rich are over taxed and need more tax breaks or else they’ll take their money overseas which would screw the middle class. The basic analogy is that if ten men of varying incomes bought beer the same way they pay taxes, the poorest man would get his beer for free and the richest would pay $59 out of the total bill of $100. Essentially, the argument is that they all get the same quantity and quality of beer (or government services) for drastically different prices.

There are several problems here. First, the analogy is insulting you by implying that you can’t understand mathematics and economics and can only understand the price of beer. Second, it is ambiguous enough to imply that the rich pay a 59% tax rate. They would love to have you believe that, but it is not true, of course. The numbers are based on the concept that 59% of government revenue comes from the top ten percent (using the story’s numbers). Note that the top one percent of earners account for as much money as the bottom ninety percent. Again, the top 1% equals the bottom 90%. Think about that for just a minute. Now does it seem so odd that 5% of earners pay 50% of the tax bill?

For an entertaining reply to the ‘Beer and Taxes’ letter, read this blog post: Beer and Taxes. For more information on the growing movement to lessen the growing wealth divide, visit United for a Fair Economy.

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