Explaining the Tax System for Rich and Poor

Suppose that every evening, 10 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 10 men drank in the bar every evening and were quite happy with the arrangement, until one day, the owner said, "Since you are all such good customers, I'm going to reduce the cost of your daily beer by 20". Drinks for the 10 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 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 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.


Therefore, the fifth man, like the first four, now paid nothing.
The sixth now paid 2 instead of 3 (33% saving).
The seventh now paid 5 instead of 7 (28% saving).
The eighth now paid 9 instead of 12 (25% saving).
The ninth now paid 14 instead of 18 (22% saving).
The tenth now paid 49 instead of 59 (16% saving). 


Each of the six was better off than before. And the first four continued to drink for free. But, once outside the bar, the men began to compare their savings.
"I only got a pound out of the 20 saving," 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 pound too. It's unfair - he got 10 times more benefit than me!"
"That's true!" shouted the seventh man. "Why should he get 10 back, when I got only 2? The wealthy always win!
"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 beat him up.


The next night the tenth man didn't show up for drinks, so the nine sat down and had their 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, labour unions and government ministers, is how our tax system works. The people who pay the highest taxes will naturally 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.

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Rob Horlock has established The Mid Life Opportunity (www.midlifeop.com), a community for people in Midlife. Advice and Guidance is available from The Mid Life Coaching Panel. It’s free to join - click here

Mamils

Yesterday I met a very nice man called James who told me that he was a Mamil.

‘A Mamil?’ I said.

‘Yes,’ replied James, ‘I’ve become a Mamil – a Middle Aged Man in Lycra!’

James is a very keen cyclist, spending his weekends out in the country, lycra clad, cycling around the highways and byways, thinking nothing of riding 30 miles or more. Apparently, this is a growing trend.

Research by Mintel shows that there has been a surge in the number of middle aged men like James who are forsaking their ‘midlife crisis’ sports cars, designer jeans and younger women and buying a bicycle instead. According to Mintel, the past few years have seen the rise of the ultra techno, full carbon fibre, sexy looking road bike. The market for these bikes is expanding rapidly, helped in no small part by the Beijing Olympics and some smart marketing. And Mamils are leading the way.

It’s a very healthy option, I’m sure. Not an inexpensive one, though. James has spent nearly £4,000 on his bicycle and accessories - his new lycra wardrobe, cycling helmet, gloves etc have set him back another few hundred pounds. He loves the look and loves the freedom of the open air and mixing with other Mamils.

As a spokesperson for people in midlife, will I be joining James? Er, probably not. I think I’ll stick to riding my mountain bike to the pub occasionally, on sunny days and leave the lycra to the Mamils!

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Rob Horlock has established The Mid Life Opportunity (www.midlifeop.com), a community for people in Midlife. Advice and Guidance is available from The Mid Life Coaching Panel. It’s free to join - click here

A gift for people who like puzzles

Do you have a friend or relative who likes puzzles or brainteasers? They could be in midlife, a little older or a lot younger. Here is a great fun gift which is both practical and provides an amusing talking point - the mathematical clock. I have one of these and I can guarantee that people will be absorbed by it when they realise how it works.

Each number on the clock is represented by a mathematical equation - work out the equation to reveal the number. Of course, you know what the number will be by its position on the clock face - which makes it all the more frustrating when you know the answer but can't work out the equation! (hint: ask a 10 year old ...)

The clock comes in two styles - 'blackboard' and 'graph paper' - both of which are designed to complement the 'old school' theme.

If you're looking for something different to buy for one of those people that is difficult to buy for, perhaps The Mathematical Clock is the answer.

For more information, click here - a great fun gift for Birthdays or Christmas.

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Rob Horlock has established The Mid Life Opportunity (www.midlifeop.com), a community for people in Midlife. Advice and Guidance is available from The Mid Life Coaching Panel. It’s free to join - click here

The Law of Unintended Consequences - LUC

My previous post was about decision making and the gulf between those who make decisions and those who are impacted by the decisions. One of the main reasons that decisions can have unexpected results is that LUC is ignored. LUC is The Law of Unintended Consequences and almost always affects decisions, usually for the worse.

Here are some examples:

• I live in The New Forest, which is famous for the ponies that roam free in the forest. There are many horse owners who live in the forest and who keep their animals in pony paddocks or stable yards, usually 2 or 3 fields. The forest recently became a National Park and new rules were proposed which were not well thought through. One of these was that ‘every horse must have at least one hectare (2.4 acres) of land to graze’. This was to prevent over crowding. So pony owners would have to have at least 4.8 acres to keep two ponies. Any horse owner will tell you that the amount of grass which would grow in one hectare during the summer would far exceed what the horse could eat - in fact, given that amount of grass, the horse would almost certainly go down with laminitis and possibly die. So the National Park’s decision to avoid overcrowding in pony paddocks would have had the (LUC) effect of killing off the very horses that were trying to encourage. Thanks to a local ‘uprising’ the policy was never implemented.
• Aid is given to developing countries from western governments. This may or may not be effective. An example might be the provision of fishing nets for local people to allow them to catch fish. Very worthwhile, you may think. But this action puts the local supplier of fishing nets out of business and perhaps he moves away. What happens when the new fishing nets need to be mended or replaced? There is nobody to do it. LUC has played it’s part and the locals have gone from having some old fishing nets, to plenty of new fishing nets, to no fishing nets at all.
• The welfare state was introduced to help people out of poverty. The founders little realised that LUC would ensure that millions of people now take welfare as an alternative to work.

These are all negative examples. There are positive examples too.

• The Chilean miners that were trapped underground for nearly two months were rescued by drilling a rescue shaft. Whilst drilling this shaft, LUC came into play and previously unknown deposits of gold and silver were discovered. These may even cover the cost of the rescue, which was funded by the Chilean government.

So when you make decisions, don’t ignore LUC. It’s impossible to second guess every angle but don’t assume that things will work out the way that you always expect them to!

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Rob Horlock has established The Mid Life Opportunity (www.midlifeop.com), a community for people in Midlife. Advice and Guidance is available from The Mid Life Coaching Panel. It’s free to join - click here

Decision Making

In every situation, people fall into one of two categories – the person making the decision or the person that is affected by the decision.
In every case, we hope that the person making the decision understands the implications and the consequences of that decision.
Sadly, in many instances, the person (or people) making the decision(s) doesn’t understand the situation properly and those affected suffer.
We see this at the macro level – decisions made by western governments to ‘aid’ people in developing countries or decisions made by our government which affect us directly. How often do we hear people saying ‘Why have they done this, they have no idea how ordinary people live?’
Too often this is true. Decisions are made by people in power whose lives are a million miles away from the day to day lives of all the people that the decision affects. They have very little idea how the consequences will pan out – they know what they think will happen, based on the advice that they receive from their advisors (many of whom are equally out of touch). The reality is often very different.
Those of us who are affected by these decisions are also, of course, making decisions of our own which affect other people. What about our decisions? Do we always know how the consequences will play out? How our decisions will affect our partners, our friends, our colleagues or our customers?
We can never be 100% sure of the consequences of our decisions (and neither should we – nothing would ever get done!) But perhaps we should pause sometimes and think more deeply about who will be affected and how they will be affected. Having a better understanding of this at the outset guarantees better results (for everyone) in the long term.
Next time – LUC, the Law of Unintended Consequences.

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Rob Horlock has established The Mid Life Opportunity (www.midlifeop.com), a community for people in Midlife. Advice and Guidance is available from The Mid Life Coaching Panel. It’s free to join - click here

Views on The English Language

Most people agree that English is not the easiest language to learn. Apart from the fact that those of you in the US spell some words differently to those of us in the UK, there are so many grammatical rules, exceptions and irregularities that it amazes me how well non-English speaking people pick it up.


Signs provide a great source of examples of the ‘power’ of English and how it can be misused, abused or simply misunderstood. The ‘errant apostrophe’ is well documented – the greengrocer’s “Pea’s” or “it’s” used in the wrong context. But there are other examples that are more subtle. Here’s a couple that I’ve seen recently:

A sign in a local (very smart) pub: ‘We are looking for part time staff’. You feel like adding ‘If you see them, please send them home!’

Another sign in the toilets of a large hotel: ‘Smoking is prohibited in this hotel. If you observe anyone smoking, a complaint may be made to the management’. So if I see someone smoking, somebody might complain about me …

Have you seen any similar humorous examples?

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Rob Horlock has established The Mid Life Opportunity (http://www.midlifeop.com/), a community for people in Midlife. Advice and Guidance is available from The Mid Life Coaching Panel. It’s free to join - click here