Farm Ireland

Saturday 24 March 2018

Losing out to high tax

A new system will hurt us all -- the rich will avoid paying and the poor will carry the can

Joe Barry

Joe Barry

Our national finances seem to be stabilising and hopefully they will continue to improve. There was a great danger that the Government could run out of money and be unable to borrow any more. It has happened before and, like the current worldwide collapse in asset values, it could happen again. At last something positive is now being done and the carbon tax will certainly help forestry.

We have hard years ahead of us but those of us over 50 have lived through a lot worse.

If we know how to grow our own food, keep a few chickens, pit spuds and carrots, split logs, lay a hedge, hang a gate and generally be self-sufficient in the basic needs of our households, we have the means to survive. No one has to buy new clothes, TVs, cars or furniture if the old ones are still serviceable.

The past decade was an era of madness, when people borrowed and spent money as if there was no day of reckoning ahead. That day has now arrived and there is nothing the self-interest pressure group can do to alter reality.

At least our Government has begun to stand up to vested interests and govern.

Hopefully the following will help explain how our current tax system works:

Bar-stool economics

Suppose that every day 10 men go out for beer and the bill for all 10 is €100. If they paid their bill the way we pay our taxes, it would go something like this:

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  • The first four men -- the poorest -- would pay nothing;
  • The fifth would pay €1;
  • The sixth; €3,
  • The seventh; €7;
  • The eighth would pay €12;
  • The ninth; €18;
  • The 10th -- the richest -- would pay €59.

So, that's what they decided to do. The 10 men drank in the bar every day and seemed quite happy with the arrangement, until one day the owner threw them a curve ball.

"Since you are all such good customers," he said, "I'm going to reduce the cost of your daily beer by €20."

Therefore, drinks for the 10 now cost a total of just €80.

The group still wanted to pay their bill the way taxes are paid, 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:

  • The fifth man -- like the first four -- now paid nothing (100pc saving);
  • The sixth now paid €2 instead of €3 (33pc saving);
  • The seventh; €5 instead of €7 (28pc saving);
  • The eighth now paid €9 instead of €12 (25pc saving);
  • The ninth; €14 instead of €18 (22pc saving);
  • The 10th now paid €49 instead of €59 (16pc 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 euro out of the €20," declared the sixth man. He pointed to the 10th man, "But he got €10."

"Yeah, that's right," exclaimed the fifth man. "I only saved a euro, too. It's unfair that he got 10 times more than I did."

"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 10th and beat him up.

The next night the 10th 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.

The moral of the story is that begrudgery benefits no one.

If we introduce a high tax regime it will mean that the risk takers and wealthy may not show up any more and might even start drinking overseas.

Irish Independent